A company treasury should not depend on any one person. The 2 of 3 multisig design helps: any two keys can sign, so one absent keyholder does not stop the company. Continuity planning makes sure the remaining people know what to do. These scenarios assume a 2 of 3 set-up as described in the multisig explainer.
Source: Bitcoin BIPs: BIP 11: M of N standard transactions (multisig).
A keyholder leaves
Planned or sudden, a departing keyholder's key should no longer be relied on, even if they return the device.
- The remaining two keyholders sign a transfer to a new 2 of 3 wallet that does not include the old key.
- A replacement keyholder creates a new key in a fresh key ceremony.
- Update the key register, the descriptor backups, the policy's list of signers and the minutes.
A keyholder is ill or unavailable
In a 2 of 3, the other two keys can still sign, so payments can continue under the normal approval rules.
- Decide in the policy how long an absence can last before the key is replaced.
- If there is doubt about the device or backup, treat it as a departure and move to a new wallet.
- Record who approved each transfer while the keyholder was away.
A keyholder dies
The company still controls its funds through the other two keys. The key belonged to the company role, not to the person, which is why roles matter.
- Follow the policy and take legal advice on the company's position and any personal effects that held company devices or backups.
- Move funds to a new wallet with a replacement key, as for a departure.
- Record the steps taken in the minutes.
Why it matters
A review by Ontario Securities Commission staff of the QuadrigaCX collapse found that one person had sole control of the platform with no internal oversight. No single person should be the only one able to move funds, or the only one who knows how. See security lessons.
Handover document template
A short document, kept with the company records, that lets the remaining keyholders and the board act without guesswork. It records roles, locations by description, test dates and contacts. It must never contain recovery words or PINs.
Keyholder handover template (PDF and Word)
A two-page A4 template, as a PDF and as an editable Word document.
Free. One email with the whole template library, then one short lesson each Thursday. Unsubscribe at any time. See our privacy notice.
It covers: the wallet and its policy, the 2 of 3 rule, each key by role with its device and backup location, where the descriptor copies are, provider contacts if any, the last recovery test, and the steps for replacing a keyholder.
When a keyholder leaves: rotating the key
A checklist for rotating a key and updating policy when someone who holds a company key moves on.
Every company's set-up differs. Adapt the order to your own key register and continuity plan. If anything here conflicts with the linked source, the source wins.
In a 2 of 3 multisig, one person leaving does not put the funds at immediate risk: no single key can move them. But the company now depends on the two keys that remain, and the departing person may still know where a backup is kept or have seen recovery words. The safe course is to treat that key as retired and move the funds to a new wallet that does not include it.
Source: Bitcoin BIPs: BIP 11: M of N standard transactions (multisig).
On the day
- Collect the company signing device and any backup the person held, against a signed handover note.
- Remove their access to the coordinator software, the provider or custodian portal, shared email and password manager entries.
- Mark their key as retired in the key register. Do not wipe old records.
- Check the wallet history in a watch-only wallet for anything unexpected.
Rotate the key
Create the new key
The new keyholder creates a new key on a new or reset signing device, in a short key ceremony, with an observer.
Create the new wallet
Build a new 2 of 3 wallet from the two remaining keys and the new key. Save the new descriptor backup in each location. Show the first receiving address on all three devices and check they match.
Source: Bitcoin BIPs: BIP 380: Output script descriptors, general operation (wallet backups and exports), Bitcoin BIPs: BIP 32: Hierarchical deterministic wallets (extended keys).
Test, then move
Send a small amount to the new wallet and sign a test spend from it with two keys. Then move the balance from the old wallet, checking the destination on each signing device. This is a transfer between the company's own wallets.
Source: Bitcoin BIPs: BIP 174: Partially Signed Bitcoin Transaction format (PSBT).
Retire the old wallet
Keep the old descriptor as a watch-only record for audit. Anything sent to an old address later will still arrive there, so tell customers and providers the new address.
Update the paperwork
| Document | What changes |
|---|---|
| Key register | Retire the old key; add the new keyholder, device and backup locations. |
| Treasury policy and signing rules | Names of who may approve and sign. |
| Board minute | Record the change and the rotation. |
| Provider and custodian mandates | Remove and add authorised users. |
| Insurance | Tell the insurer if the policy requires it. |
| Continuity plan | Update contacts and instructions. See the scenarios above. |
Company filings
In the UK, if the keyholder was also a director, the company must tell Companies House within 14 days. In the US, director and officer changes are governed by state law and the company's own documents.
Fees and tax
Moving bitcoin between the company's own wallets is not a sale, but it costs a network fee. In the US a fee paid in bitcoin is itself a disposal for tax. Keep the transaction IDs with the board minute.
Source: HMRC: CRYPTO41250: Corporation Tax on chargeable gains, what counts as a disposal, IRS: Digital assets.
Where to go next
- Key ceremony walkthrough for setting up a replacement key
- What a treasury policy covers
- Board meeting checklist
Sources
Primary sources only. Each link was checked on 1 November 2026. Rules change, so confirm the current version with your adviser.
- Bitcoin BIPsBIP 11: M of N standard transactions (multisig)
- Bitcoin BIPsBIP 380: Output script descriptors, general operation (wallet backups and exports)
- Ontario Securities CommissionQuadrigaCX: a review by staff of the Ontario Securities Commission (2020)
- NISTSP 800-57 Part 1 Rev. 5: Recommendation for key management
- NCSCSmall organisations guide to cyber security
- Bitcoin BIPsBIP 32: Hierarchical deterministic wallets (extended keys)
- Bitcoin BIPsBIP 174: Partially Signed Bitcoin Transaction format (PSBT)
- GOV.UKRunning a limited company: company information you must report (14 days for director changes)
- HMRCCRYPTO41250: Corporation Tax on chargeable gains, what counts as a disposal
- IRSDigital assets
One email. The whole library.
Policy checklist, board paper, recovery drill record, document pack and the rest, in one send. Then one short Thursday lesson for small companies in the UK and the US.
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This is general information and education only. It is not financial, investment, tax, accounting, legal or regulatory advice, and it is not a recommendation to buy, sell or hold bitcoin or any other asset. It does not take account of your circumstances or those of your company. You must obtain your own official professional advice to confirm this information is correct before acting on it.
Rules change. This information is correct to our understanding at the last-reviewed date, but it may be incomplete or out of date, and official sources take precedence. Bitcoin is volatile. A company that buys it could lose some or all of the money it puts in.
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