If your spouse, partner, or family member holds shares in a business, whether they founded it, joined it, or inherited part of it, there are three questions worth asking. Not of them necessarily. Of the situation.
Most people connected to a shareholding have never asked any of them. That is not a criticism. Shareholders' agreements are not typically shared over dinner. But the answers determine what happens to your household if something changes for the person who holds those shares.
Question one: Is there a shareholders' agreement, and does it include a funded Buy/Sell arrangement?
A shareholders' agreement sets out what happens if an owner dies, becomes permanently disabled, or otherwise needs to exit. A Buy/Sell Agreement is the specific mechanism that gives the remaining shareholders the right, and the obligation, to purchase that person's shares at a defined value. On its own, an unfunded agreement is a plan without money behind it. Ask whether one exists, and whether it is funded by insurance held on each shareholder's life.
Question two: Has your family member personally guaranteed any business debt?
Personal guarantees are common wherever a business takes on a commercial lease, equipment finance, or a business loan. They mean that if the business cannot meet the debt, the guarantor, and often the guarantor's personal assets, including the family home, stand behind it. If your household's biggest asset is guaranteeing a business debt, that is worth knowing before it becomes urgent.
Question three, and the one almost nobody asks: if a co-shareholder died or became incapacitated tomorrow, would your family be expected to help fund buying out their share, and could you actually do it?
This is the question this series exists to raise. In a business with more than one shareholder, the obligation to buy out a departing owner's stake usually falls to the remaining shareholders. If that obligation is not funded by insurance, the money has to come from somewhere, and it is often the remaining shareholders' own households that end up finding it. Savings. A remortgage. A personally guaranteed loan.
This is not a hypothetical for every household. It is a direct financial exposure for any family connected to a multi-shareholder business, whether that business is family-owned or was built by people who were strangers until the day they incorporated it. And it grows sharply larger if the shareholder in question holds a majority stake. A bigger share means a bigger buyout, funded, if it isn't insured, out of somebody else's household.
What to do with the answers.
If any of these three questions comes back as “I don't know,” that is the honest and common starting point. It is also the reason this series exists.
If you want a starting point today, make contact with me via the contact page on the website. We can then discuss your situation and the steps to support you.
The content shared here is general in nature and designed to broaden your financial knowledge. It is not personalised financial advice. For advice specific to your circumstances, I recommend speaking with a licenced financial adviser. You can also reach out via the Contact tab to start a conversation with me directly.