This information is restricted to readers in England and Wales due to the difference in legislation in Scotland and Northern Ireland.

Running a successful business involves managing many moving parts — cash flow, growth, staff, strategy — but there’s one risk that often goes unnoticed: what happens if a key person, director, or shareholder suddenly can’t work due to critical illness or death?

This isn’t just a human tragedy — it can quickly become a financial one.

Why Losing a Key Person Is More Than Just a Staffing Issue

Key people are often the backbone of the business. Whether it’s a founder with years of expertise, a shareholder making strategic decisions, or a team member responsible for major accounts — losing them creates a ripple effect:

• Revenue can drop if relationships are lost or operations stall.
• Lenders may withdraw funding due to perceived instability.
• Business value can plummet, especially during due diligence or exit planning.
• Surviving shareholders may be forced to buy out shares without any capital to do so.

In many cases, the business ends up in a legal or financial mess — one that could have been avoided with proper protection in place.

What Is Shareholder & Key Person Protection?

Shareholder and key person protection are specialist forms of business insurance designed to protect your company’s continuity when the unexpected happens.

Key Person Protection:

This policy provides a financial cushion if a key employee or director dies or is diagnosed with a critical illness. It pays a lump sum directly to the business to help:

• Recruit and train a replacement
• Stabilise finances and cash flow
• Reassure clients, suppliers, and lenders

Shareholder Protection:

If a shareholder passes away or becomes critically ill, this policy ensures the remaining shareholders have the funds to buy back the shares, keeping the company under the control of those who are still actively involved — rather than the shares passing to a spouse or estate with no involvement in the business.

It also helps the deceased’s family get fair value for their share without disputes or delays.

What Are the Consequences of Having No Cover?

Let’s say your co-founder passes away and leaves their shares to their spouse. You’re now in business with someone who has no experience or interest in running the company — or worse, they may want to sell their shares to an outside party.

Without a shareholder agreement and protection in place:

• You may not have the funds to buy them out.
• The business could stall, or even collapse.
• Long-term plans for growth, sale, or retirement could be ruined.

How to Put Proper Protection in Place

If you want to ensure your business survives a crisis — and that your personal financial goals stay intact — the following steps are crucial:

1. Identify your key people — founders, revenue generators, strategic decision-makers.
2. Understand shareholding agreements and whether there’s a clear buy-sell arrangement.
3. Get advice from a specialist adviser who can tailor a protection package to your structure.
4. Put policies in place and regularly review them as your business grows.

Don’t Leave It to Chance

You’ve worked hard to build your business. Don’t let all of that effort be undone by something completely out of your control.

Shareholder and key person protection gives you the confidence that, no matter what happens, your business and your future remain secure.

If you'd like to speak to a specialist about protecting your business, get in touch today.

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