Your Partner Dies — Who Owns Their Shares Now?
Without a plan, your business partner’s shares pass through their estate. Their spouse, child, or someone you have never met becomes your new co-owner. They may want to sell immediately, disagree with every decision, or simply have no interest in the business. This happens to UK companies every year.
The solution: a cross-option agreement. This gives the surviving partner the option to buy the deceased’s shares, and gives the estate the option to sell. Neither side is forced — which is important because it preserves Business Property Relief eligibility for IHT.
How it works:
- Agreement signed while both partners are healthy
- Life insurance policies taken out — each partner covers the other
- If one dies, insurance pays the survivor
- Survivor buys the shares using the insurance proceeds
- The deceased’s family gets cash; the survivor gets full control
Insurance structure: Own-life policies written in trust are the most tax-efficient — proceeds paid outside the estate, no IHT, no income tax. Review cover annually to match current business value.
Valuation options: Fixed price (reviewed yearly), formula-based (e.g. 3x average profits), or independent valuation at the time of death. Most agreements combine these approaches.
What to do now: If you co-own a business without a cross-option agreement, start the conversation today. Speak to your solicitor and get insurance quotes while you are both healthy. The businesses that survive the loss of an owner are the ones that planned for it.