Why it matters
If a founder dies, their shares pass to their family, and the other owners may not have the money to buy them. Shareholder protection and a cross-option agreement provide the money and the right to buy the shares.
Business & family protection for startups
If your business would struggle to survive losing you or a co-owner, it may be worth protecting. This guide explains key-person cover, shareholder protection and relevant-life cover, and the problem each is designed to solve.
Business protection pays out if an owner or key person dies or becomes seriously ill. Key person cover replaces lost profit, shareholder protection funds the purchase of the shares, and relevant life cover gives directors tax-efficient personal life cover paid for by the company. A regulated adviser can set it up.
The basics
- Key person cover, which replaces lost profit if someone the business depends on dies or is seriously ill
- Shareholder and partnership protection, which funds the purchase of a deceased or seriously ill owner's share
- Relevant life cover, which is tax-efficient life cover paid for by the company
- Business loan protection
- Cross-option agreements set up alongside the cover
How to get regulated financial advice
- 1Understand the basics
This page explains what this area involves, so you know which questions to ask an adviser.
- 2Find an authorised adviser
Regulated advice can only come from an FCA-authorised firm. You can search the FCA register, or ask us for an introduction to Equity & General, the firm we have an introducer agreement with.
- 3Decide whether to go ahead
An introduction is free, and you do not have to take one. If you go on to take advice, the adviser explains any fees before any work starts.
Common questions
What is key-person insurance?
Cover that pays the business a lump sum if a person it depends on, often a founder, dies or becomes critically ill. The money helps the business keep going while it recovers or replaces them. A regulated adviser can advise on the right level of cover.
What is shareholder protection?
It gives the surviving owners the money to buy a deceased shareholder's shares from their family, so the family receives the value of the shares and the remaining owners keep control. It is usually paired with a cross-option agreement.
Is relevant-life cover tax-efficient?
For directors, it can provide personal life cover paid for by the company, usually as a deductible expense and without a benefit-in-kind charge. A regulated adviser confirms whether it fits your setup.
General information only. This page explains a topic in general terms. It is not advice, a personal recommendation or a financial promotion, and it does not invite or encourage you to buy any product or service. Everyone's circumstances are different.
Regulated financial advice can only be given by a firm authorised by the Financial Conduct Authority. You can find one on the FCA register (register.fca.org.uk). Buzz Accounting is not authorised to give regulated financial advice. We have an introducer agreement with Equity & General (E&G), authorised and regulated by the FCA (No. 474163). If you would like an introduction, we can make one.
The value of investments and any income from them can fall as well as rise, and you may get back less than you invested. Your home may be repossessed if you do not keep up repayments on a mortgage. Tax treatment depends on your individual circumstances and may change. Will-writing, trusts and some estate-planning services are not regulated by the Financial Conduct Authority.
