Business solution
Buy-sell agreement: the share buyout, funded in advance
Your agreement says the survivors buy a deceased partner's shares. With what money? Life insurance on each partner provides the capital at the exact moment the clause applies.
- Buyout at the agreed price, no borrowing
- The estate receives fair value
- Surviving partners keep control
Connect with a partner financial security advisor.
Without funding, the buyout clause stays theoretical: survivors must borrow or pay over years, the estate waits, and the heir may end up a shareholder anyway. The conflicts that follow cost more than the insurance.
The solution
- 1
One policy per partner
Owned by the company (corporate redemption) or criss-cross between partners, per the tax structure your accountant recommends.
- 2
An amount aligned with valuation
The share value is set or reviewed periodically in the agreement; the insurance follows that value.
- 3
Disability included
A rider or disability buy-sell policy covers a partner unable to work for a prolonged period.
- 4
Optimized taxation
Capital dividend account, cost-base bump: the advisor works with your tax specialist.
Three partners in a construction company valued at $3M each hold one third. The company buys a $1M 20-year term on each partner. At one partner's death, it buys their shares from the estate at the agreed price; the other two keep 100% control, with no new debt.
Illustrative: the structure (corporate or criss-cross) and amounts depend on the agreement and taxation. Your accountant's opinion and the insurer's illustration prevail.
Who it is for
- Companies with two or more partners
- Family businesses with active and passive shareholders
- Incorporated professional practices
- Any shareholders' agreement whose buyout clause is not yet funded
Does your agreement provide the money?
Tell the advisor whether you have an agreement (or that there isn't one): they read it, identify what's funded and what isn't, and price the solution.
Funding the share buyout: four options
Common mistakes
- 01
An agreement without a funding clause
The purchase obligation exists, the money doesn't. It's the first thing the advisor checks in your agreement.
- 02
Amounts frozen for ten years
The business gained value; the coverage didn't. Schedule a review of valuation and insured amount at fixed intervals.
- 03
Ignoring disability
A disabled partner who keeps shares without working creates as much tension as a death. A disability clause and funding are essential.
Points to consider
- The agreement must exist and set the valuation mechanism.
- Review amounts at each business valuation.
- Mind age and health gaps between partners (unequal cost: corporate ownership smooths it).
- Plan for a living partner's exit (retirement, dispute).
The solutions presented are for information only and rely on current Canadian and Quebec tax legislation, which may change. Sommet Protection gives no financial, tax or legal advice: the analysis is done by a partner financial security advisor, together with your accountant and legal advisors.
Frequently asked questions
We have no shareholders' agreement. Where do we start?
With your lawyer and accountant for the agreement; the advisor works in parallel to quantify and underwrite the funding so everything is ready at the same time.
Should the company or the partners own the policies?
Both structures exist; the choice depends on taxation (capital dividend account, cost base) and the number of partners. A decision to make with the tax specialist.
Protecting the business you built: the insurance guide for owners and the self-employed
The five risks that close profitable SMEs, and how to fund them for a fraction of their cost.
Read the guide- 8 chapters
- 1. You are the most important asset — and the least insured
- 2. A partner's death: the scenario that divides families
- 3. Disability: three protections, three different roles
- 4. The key person worth 30% of revenue
- 5. Debts, guarantees and lenders
- 6. Tax at death on shares: the founders' file
- 7. A health plan for your incorporated company
- 8. Where to start
The solutions
Key person insurance
Protect the business from losing the person it depends on.
Learn more →Self-employed disability
Replace your income when you can no longer work.
Learn more →Business overhead expense
Pay rent, salaries and loans during your disability.
Learn more →Business critical illness
A lump sum for the company or owner at diagnosis.
Learn more →Tax at death on your shares
Fund the tax on your company's value so the successors don't have to sell.
Learn more →Business succession and transfer
Secure the transfer to family or executives, whatever happens to the founder.
Learn more →Loans and personal guarantees
So the business's debt never becomes your family's.
Learn more →Health and key employee retention
Protect and retain your essential executives with company-funded benefits.
Learn more →
Let's talk about your business
A partner SME specialist advisor calls you back for a no-fee diagnosis. Bring your shareholders' agreement and financial statements: the advisor quantifies with you.