Shareholder & Key Person Protection

We refer to Shareholder Protection and Key Person Protection as Business Protection – because they protect the business and its shareholders.

  • Shareholder Protection provides the surviving shareholders or the business with a lump sum to purchase a deceased or critically ill shareholder’s shares (equity).  This provides for the family of the shareholder, whilst also protecting other business owners. Life insurance is usually the only way to provide the correct amount of funds at the time they are needed. The sum assured for each shareholder will represent their share of the business value.
  • Key Person Protection provides your business with a cash injection in the event a key individual was to pass away or suffer a critical illness. The funds can often be a lifeline for the business.

Shareholder Protection

In businesses run by unconnected parties, the death or incapacity of an owner is likely to cause serious disruption and problems for both the business and the family of the owner concerned.

By having a structured shareholder protection agreement in place, the deceased’s estate will receive a fair value for the newly acquired shares. It will also allow the surviving shareholders to remain in control of their business, without potentially unwanted outside disruption.

The first step is to identify the value of the business. This will allow you to calculate the value of each shareholder’s equity in the business.

We also recommend you review the company’s existing articles of association, shareholder agreement and any other legal documents (cross option agreement).

Key Person Protection

The loss of a key person can often result in a fall in profits. This could be because of sales/revenue falling or due to the costs of replacing such an individual. You may find business relationships with clients or suppliers also suffer.

The funds can be used by the business to aid cash flow, repay outstanding debts, and support staffing costs or towards replacing the individual.

For key person cover, you should first identify who these individuals are in the business. Following that, you will need to calculate their contribution to the business. There are various ways to do this that we can help guide you through.

For more information, contact us on 01603 760866 or

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