💡Can My Limited Company Purchase Investments?

Protecting your business means protecting its most valuable asset, your people. Business Assurance ensures that your company can survive and continue to thrive even in the face of the unexpected.
Below are key forms of business protection every company should consider.

1. Co-Director’s Insurance

What Is Co-Director’s Insurance?

The sudden death of a company director can create serious challenges for a business.
Co-Director’s Insurance provides funds to the surviving directors, allowing them to purchase the shares of the deceased director from their next of kin.

Often, the deceased’s family may not wish to be involved in the company, or may lack the knowledge or interest to continue in business operations — making this arrangement mutually beneficial.

How Does It Work?

• Each director takes out a policy covering the value of their shares.
• Premiums are based on the amount of cover required and the director’s age and health.
• In the event of death, a lump sum is paid to the insured parties.
• The funds are then used to buy back the deceased director’s shares from their heirs.

Why Is Co-Director’s Insurance Important?

Co-Director’s Insurance provides peace of mind for both the business and the families involved:

• Prevents loss of company control to outside parties
• Ensures business continuity
• Provides fair compensation to the deceased director’s family
• Protects relationships and maintains stability during a difficult time

2. Partnership Insurance

What Is Partnership Insurance?

Partnership Insurance is similar in concept to Co-Director’s Insurance but applies to business partnerships rather than limited companies.
Each partner takes out a life insurance policy on the others, naming themselves as beneficiaries.

If a partner dies, the surviving partner(s) can use the insurance payout to purchase the deceased partner’s share of the business — keeping ownership within the partnership.

How Does It Work?

• Partners insure one another’s lives.
• On the death of a partner, the surviving partner(s) receive the proceeds.
• These funds are used to buy the deceased’s share of the partnership, preventing external parties or heirs from taking over.

This helps maintain control, continuity, and ownership stability in the business.

What Is a Buy-Sell Agreement?

A Buy-Sell Agreement complements Partnership Insurance.
It is a legally binding contract that determines:

• The value of each partner’s share
• The terms under which shares can be bought or sold
• “Trigger events” such as death, disability, or retirement

In the event of a partner’s death, the agreement ensures their heirs are fairly compensated, while surviving partners retain control of the business.

Tax Treatment of Partnership Insurance

Advantages of Investing Through a Limited Company

• Life of Another Policy
  • Capital Gains Tax (CGT): Not applicable.
  • Inheritance Tax (IHT): Not applicable, provided the surviving partner paid the premiums.
• Own Life in Trust Policy
  • Capital Gains Tax: Not applicable.
  • Inheritance Tax: Not applicable, as long as proceeds are used to buy out the deceased partner’s share.
  • The Revenue Commissioners have clarified that proceeds under such arrangements are exempt from Inheritance Tax when applied appropriately.

3. Key Person Insurance

What Is Key Person Insurance?

Also known as Key Man Insurance or Key Person Protection, this policy safeguards a business against the financial loss it may face if a key individual, such as a founder, senior manager, or technical expert, dies or becomes critically ill.

The payout helps the business:

• Offset loss of profits
• Recruit and train a replacement
• Maintain stability during transition
• Repay loans if the key person had personal guarantees

Who Are Key People in a Business?

Your key people are those whose skills, experience, or relationships are vital to the company’s success, such as:

• Directors and Partners
• Senior Managers in Sales, Technical, or Operations roles
• Founders or key decision-makers
• Employees who hold critical client relationships or unique expertise

Insuring these individuals provides funds to keep the business running while replacements are recruited or operations are adjusted.

Who Provides Personal Guarantees?

When businesses secure loans, banks often require personal guarantees from directors or owners.
If a guarantor becomes seriously ill or dies, the lender could call in the loan.

Key Person Insurance can cover these loans, ensuring:

• The loan is repaid
• The business remains financially stable
• The guarantor’s family is not burdened with repayment

Tax Treatment of Key Person Insurance

Premium Tax Relief

Tax relief on Key Person Insurance premiums may be available only if all four conditions below are met:

• The key person owns less than 15% of the company (not a proprietary director).
• The policy covers loss of profits or replacement costs, not company loans.
• The relationship is strictly employer–employee.
• The policy is a term assurance plan that does not extend beyond retirement age.

If these conditions are met, corporation tax relief may be claimed on premiums.

Tax Treatment of Benefits

Tax on the payout depends on the purpose of the cover:

Summary of Tax Treatment

• You cannot claim both premium tax relief and tax-free benefits.
• If the policy protects profits, premiums may qualify for tax relief, but the payout is taxable.
• If the policy covers loans, the payout may be tax-free, but premiums cannot be deducted.
• To cover both profits and loans, it’s often best to take out two separate policies.

Summary: Why Business Assurance Matters

Business Assurance ensures your company can:

• Stay financially secure in the face of unexpected loss
• Protect ownership and control from external parties
• Compensate families of deceased partners or directors fairly
• Maintain confidence with lenders and investors
• Support recruitment and continuity planning

💼 In short: Business Assurance is not just insurance, it’s a vital succession and continuity plan for your company’s future.