Shareholder Protection

Helps business owners keep control of their company if one of them dies or is diagnosed with a critical illness.

Share and Ownership Protection

Share and Partnership Protection helps business owners keep control of the company if one of them dies or is diagnosed with a critical illness.

Losing an owner can have a huge impact on the day-to-day running of a business, and can quickly result in financial difficulties.

How does Shareholder Protection work?

A share protection arrangement provides the funding to enable the surviving business owner to purchase the absent or deceased shareholders shares from them or their estate.


For limited companies. Each shareholder takes out a Life insurance plan for the benefit of their fellow shareholders. Critical Illness Cover can be included.

For partnerships and limited liability partnerships. Each partner takes out a life insurance plan for the benefit of their fellow partners. Critical Illness Cover can be included.

Why consider Share Protection

The death of a business owner or diagnosis of a critical illness is likely to have a major impact on a business. It could lead to serious financial uncertainty.

Share protection allows the remaining partners or shareholders to remain in control of the business following the death of the shareholder. If there’s no share protection in place, the owner’s share in the business may be passed to their family. This means that the surviving business owners could lose control of a proportion or, in some circumstances, all of the business.

The family may choose to become involved in the ongoing running of the business, or could even sell their share to a competitor.

A share protection arrangement can minimise the risk, as well as ensure that the business ownership is maintained and controlled by the surviving shareholders and the deceased’s family is fairly financially compensated for the value of the shares. This gives the business a better chance of a secure future.

More about Shareholder Protection

This is a legally binding contract between each business owner which outlines what would happen to the shares if one of them dies (or takes early retirement due to ill health).

In Share Protection, the cross option agreement gives the surviving business owners the option to buy the deceased owner’s shareholding, and the estate the option to sell them. This process helps ensure business continuity (the business carries on trading with minimal disruption).

There are also options should the shareholder become critically ill however wish to retain their shares in the event they may recover and return to work.

A Cross Option Agreement needs to be legal written, usually completed by a solicitor.

Premium equalisation fairly splits the overall premium costs between the shareholders. If the shareholders are different ages, the costs of their individual protection policies will vary.


Older shareholders would generally pay more but be less likely to benefit because they’re more likely to die before the younger shareholders.

Each shareholder applies for an own life policy, for a term (5-10 years or up to their retirement date), for the value of their shares. From the start, the policy is held in the business trust for the benefit of the other shareholders.


If a shareholder dies or becomes critically ill, the other shareholders can use the funds from the trust to buy the shares from the absent shareholder or the deceased’s personal representatives.

Potentially, a normal shareholder protection scheme can function as long as two shareholding directors are involved. However, it is designed to be a reciprocal arrangement with all shareholders (or partners) taking part.

The amount of cover is set at the beginning of the cover and the company value at claim stage would not normally affect this amount. For this reason, our advisers will regularly review the level of cover in place and encourage business owners to take action if required.

Case study – Architects practice


  • Founded in March 2013 by two architects. One specialises in commercial, one residential. Commercial delivers 70% of profits.
  • As the practice grows, they employ several staff in support roles.
  • In April 2020, founding partner responsible for commercial projects passes away.

Our assessment

  • 70% of the business’s income is impacted.
  • Unique knowledge and contacts are lost from the business.
  • Existing contracts are put on hold and staff job security is at risk.
  • Have to pay penalty clauses for late delivery of current projects.
  • Office expenses and running costs were impacted.
  • The deceased partner’s shares are inherited by the spouse.

Solutions we put in place for the business

Shareholder protection policy to purchase shares from benefactors to retain control of the business.


Key person policy to protect profit, recruitment of replacement, payment of penalty fees and running costs.
Solutions the business had in place.

Experience you can trust

Speak to us to discuss your requirements and the options available, book a call (no obligation) to speak to one of our advisers here.