19 February, 2021
When a shareholder of a company sadly passes away, many questions are brought up surrounding what happens to the deceased's assets. In this blog, we walk you through what useful steps can be used to transfer shares from the deceased shareholder.
Relevant documents relating to the shares:
The first point of call is to look at the company's articles of association which are stored at Companies House. The articles set out the rights attached to the shares and what should happen to them in the event of the death of a shareholder. The most important thing to note is that the articles should be constantly reviewed and kept up to date to give the maximum coverage in any circumstance.
Another key document to consider, if the company has two or more shareholders, is whether the deceased had entered into a shareholders' agreement. This agreement is a private document and will not be filed at Companies House. A shareholders' agreement can deal with any number of things, however, it is not uncommon for one to contain provisions relating to the death of a shareholder.
There are several other relevant agreements which the deceased may have entered into about their shares, and one such example would be a cross option agreement. This agreement is an arrangement between shareholders, dealing specifically with what happens to shares in the company in the event of the death of a shareholder.
Everybody should ensure that their will is up to date, and this is particularly true where business assets are concerned. Your will should be updated in conjunction with the documents already discussed as if the will is inconsistent with the company's articles, shareholders' agreement or cross option agreement, then the latter three will take precedence, and the deceased wishes may be frustrated.
After considering who is entitled to the shares via the documents listed above and probate has been granted. The following two steps need to be carried out:
A stock transfer form will need to be produced which will be completed by the executor and certified on the back page which states that no stamp duty will be payable
The final step is the production of Board minutes which will approve the share transfer. The deceased's share certificate will then be cancelled, and a new certificate will be issued in the name of the executors, or the transferee, and the company's registers will be updated.