What happens if a shareholder dies?

If one of your fellow shareholding directors were to die, who would inherit their shares?

Answer - THE ESTATE, which ultimately means a spouse and/or family.  What are the possible repercussions for the company of this transfer?

1. The company’s direction may now be questionable, as the surviving spouse will become a shareholding director.   This could cause problems if the spouse has no knowledge of the business.
2. What would happen if the deceased's estate prefers a cash settlement instead of shares? If the other directors cannot, or will not, buy the shares, the estate could consider selling the shares to a third-party. The surviving directors may find themselves working with this third-party against their will.
3. How do you, as a surviving director, retain control of the company shares, now in possession of the deceased's spouse or another party?
4. If you wish to purchase these shares, how will you raise the funds?
5. What are the effects on your long term profitability as a result of not finding these funds?

A life assurance policy written in trust for the surviving directors, costs very little and would prevent any awkward situations arising.

What happens if a shareholder retires?

When a director retires, he may wish to sell his shares.  However, if the other directors do not have funds available to buy them, there is a risk that the shares will be sold to a third-party.  An investment strategy will ensure that funds are available at such times.

What happens if a shareholder becomes critically ill?

In some cases, a director may consider selling his company shares, if he is affected by a critical illness.  If the other directors want to buy the shares in these circumstances, they will need funds which would be available at that time. Again a simple life policy written in trust for the surviving directors costs very little and would provide the funds required at this difficult time.

We can help you put a strategy in place that will alleviate all the above issues. If you would like further information, please feel free to call us on 0207 407 8787 or simply complete the form below: