I run a business with a partner or staff: if one of us is gone, what happens to the company?
Partners at 50/50, a key person who falls ill, a personal guarantee on a business loan, an employee who has died. What a buy-sell agreement funded by insurance is, what cover makes sense for a small company, and what you tell an employee’s family.
In short
If a partner dies, their share usually passes to their heirs, not to the other partner. A buy-sell agreement, drafted by a lawyer, says in advance what will happen, and life cover can provide the money when it is needed.
- Talk with your partners about what you would want to happen if one of you is gone.
- Ask your accountant for a first valuation of the business, and a lawyer to look at the articles and the shareholders’ agreement.
- List the personal guarantees you have given, and for how much.
- Check that your employer’s liability insurance is in force.
From the series “The questions you are afraid to ask”: questions real people ask, with honest answers.
At a glance
- If a partner dies, their share usually passes to their heirs, not to the other partner. A buy-sell agreement says in advance what will happen.
- Life cover can provide the money for the buy-out at the moment it is needed. The agreement itself, though, is drafted by a lawyer.
- A personal guarantee is a personal obligation: what happens to it after a death is a question for a lawyer, and insurance can sit alongside it.
- Provident funds are legal entities separate from the employer, supervised by the Registrar of Occupational Retirement Benefit Institutions.
You built something together
A business is years of work, risk and trust. In a small company every person counts: the partner who knows the clients, the manager who keeps production going, you who sign the guarantees. The question “what if someone is gone?” sounds heavy, but it is one of the most responsible a business owner can ask, for their family and for the people who work with them.
The buy-sell agreement, simply
Two partners agree in writing that, if one dies, the other buys their share from the heirs at a price, or by a method, set in advance. So that the money exists at that moment, each partner has life cover. This way the family of the partner who died receives money instead of a share they may not be able to manage, and the remaining partner keeps the business. The agreement, the valuation and how the policies are held are work for a lawyer and an accountant.
Your staff
An employer with staff must have employer’s liability insurance. Beyond that, a group life or health plan and a provident fund are options. For provident funds, Law 10(I)/2020 sets out that they are legal entities separate from the employer, so that their assets are protected if the business goes bankrupt, and that a member’s rights from their own contributions cannot be reduced. Employers must pay in the contributions, including those they deducted from wages.
Your questions, one by one
My partner and I own 50/50. If one of us dies, what happens to the company?
Without an agreement, the share usually passes to the heirs, who suddenly become your partners or want to sell. The articles of association and succession law set the details, so speak to a lawyer. A buy-sell agreement funded by life cover is a common way to settle it in advance.
What is a buy-sell (cross-option) agreement funded by insurance?
It is a written agreement between partners on what happens to someone’s share if they die, with life policies that provide the money for the purchase. It needs three pieces: the agreement (a lawyer), the valuation (an accountant) and the policies. It is reviewed when the value of the business changes.
I have 10 employees. Is group health or life cover worth offering?
It often helps you keep and attract people, and it covers people who might otherwise have nothing. Weigh the cost, exactly what it covers and what happens when someone leaves. The “Group plan overview for employers” tool shows what drives the cost.
Can the company pay for my own life cover as the director?
In practice it is often done, but the tax treatment (for the company and for you) we could not confirm. Who is the policyholder and who the beneficiary also matters. Ask your accountant before you set it up.
I gave a personal guarantee on the business loan. If I die, does my family inherit the debt?
That depends on the terms of the guarantee and on succession law; it is a question for a lawyer. Life cover for an amount that covers the guarantee can help keep it from falling on your family. Ask the bank too what the contract provides in case of death.
If my key employee falls seriously ill, how does the business survive?
Key person cover, with the company as policyholder and beneficiary, can provide money to find a replacement or cover lost income. It also helps to have knowledge written down: procedures, contacts, passwords. Ask your accountant about the tax side.
A family business: how do we plan so the next generation can take over?
Start from who will carry it on and what the children who will not work in it will receive. Life cover can give a share in money to those who do not get a share in the business. Cyprus has had no estate duty since 2000; the rest of the structure is work for a lawyer and an accountant.
Is group insurance a taxable benefit for my employees?
We could not confirm this, and it may differ by type of cover. Ask your accountant or the Tax Department before you start, and tell your employees what applies.
My restaurant closed for months when I fell ill. Is there insurance for that?
For you, income protection or critical illness cover can provide money while you cannot work. For the business itself, there are general insurance covers for business interruption, usually after physical damage, not after the owner’s illness. Key person cover is another route.
As an employer, am I obliged to provide any insurance to staff?
An employer with staff must have employer’s liability insurance and pay Social Insurance and GESY contributions. Group life or health plans and a provident fund are options, unless a collective agreement says otherwise. The “Employer obligations” tool gives a first picture.
Can a company be the beneficiary of a life policy on its owner?
In key person cover, the company is usually the policyholder and the beneficiary. Ask the insurer what it accepts, and your accountant about the tax side. Make sure your family also has cover of its own, separately.
We are three shareholders and one wants out. What happens to the key-person policies?
That depends on who holds each policy and what the shareholders’ agreement says. A policy may be transferred, cancelled or continued; ask the insurer what is allowed. Review the buy-sell agreement together too, because the percentages change.
Should my small company set up a provident fund for staff?
It is not generally compulsory, unless a collective agreement provides for it. A provident fund is supervised by the Registrar of Occupational Retirement Benefit Institutions and has operating rules. Weigh cost, administration and benefit to your people with an accountant.
I put everything into my business; if it fails, I have nothing for retirement.
It is a very common fear, and a reasonable one. Many business owners keep part of their savings outside the business, however small, and from 2026 contributions to approved pension schemes are deductible up to 10% of total income. Which product suits you is for a licensed advisor to judge.
How do I value my share of the business for insurance purposes?
With an accountant’s help, and with a method all partners agree in advance, written into the agreement. The sum insured follows that valuation. Review it every few years, as the value changes.
An employee of mine died and his family asks if there is company insurance. What do I tell them?
We are sorry for the loss. Check whether there is a group life plan or a provident fund, and give the family the contact details in writing. Remind them that the widow’s pension is claimed within three months and the funeral grant within 12 months of the death, from Social Insurance.
Questions worth asking
- Who should be policyholder and beneficiary in a buy-sell arrangement?
- What happens to the policies if a shareholder leaves?
- What does the group plan cover, and what happens when an employee leaves?
- How is each cover treated for tax? (a question for the accountant)
What you can do from today
- Talk with your partners about what you would want to happen if one of you were gone.
- Ask your accountant for a first valuation of the business.
- Ask a lawyer to look at the articles and the shareholders’ agreement.
- List the personal guarantees you have given, and for how much.
- Check that your employer’s liability insurance is in force.
Every policy has its own terms. What we write here is general information, not advice; for your own case, what your policy says applies, and it is worth confirming it in writing with your insurer.
For savings, investment and pension plans this text is education, not a recommendation of any product or fund. Past returns do not guarantee future ones and values can fall. What suits you is for a licensed advisor to judge, assessing suitability (Article 30 of the IDD).
Sources
- CyLaw — Law 10(I)/2020 (occupational retirement provision institutions)
- PwC Cyprus — Tax Facts & Figures 2024 (estate duty abolished since 2000)
- ISSA — Country profile: Cyprus (rules as of 1 July 2023)
- CyLaw — Income Tax Law 118(I)/2002, Article 14 (deductions)
- Grant Thornton Cyprus — Cyprus Tax Reform 2026 (January 2026)
Read also: Business partners: if one is gone · Business guide · Self-employed: if I stop, who pays? · Provident fund and changing jobs · Will my pension be enough?
If you would like a second look, book an appointment with an advisor and bring your policy and your questions. You will go through them together, with no obligation.
