Share Transfer on Death of Shareholder
Share Transfer on Death of Shareholder

Share Transfer on Death of Shareholder

Background

When a shareholder dies the right to his interest in the shares will pass to whoever inherits them under his will or intestacy. The deceased shareholder's rights will be administered by his or her executors (if there is a will) or administrators of the estate if the shareholder has died intestate.

Two deciding legal considerations

The beneficiary can make a written request to the company to appoint someone registered as the holder of the inherited shares. The very same appointed person can also execute an instrument or transfer in respect of it. However, this can be a complicated and time-consuming process

  • Does the deceased shareholder have a will?

  • Is there any buy-sell agreement? 

The Will

The appointed executor will carry out the following: -

  • Obtain the grant of probate (GOP) from the high court.

  • Notify the Company Secretary regarding the share to be transmitted according to Section 109 of the Companies Act 2016.

What If There Is No Will?

Family members need to obtain a Letter of Administration (LA) by engaging a lawyer for the application process.

  • An administrator will be appointed

  • Once the administrator received the court order,

  • Notify the Company Secretary regarding the shares to be transmitted according to Section 109 of the Companies Act 2016. 

Buy-Sell Agreement

It’s to outline the terms and conditions under which the shares of a deceased shareholder will be purchased by the surviving shareholders or the company itself. 

The agreement includes provisions such as the purchase price, valuation methods, funding mechanisms, and the process for executing the buyout .

The agreement will be presented to the Company’s Secretary to proceed with the transfer of shares under Section 105 of the Companies Act 2016.

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Published : 12-Jul-2023

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