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Avoiding Problems when a

Co-Shareholder Dies

Have you ever thought of what might happen if one of your fellow shareholders dies?


Of course you’d miss their presence, as well as their experience and expertise. But do you know what would happen to their shares?


An uncertain future?

The transfer on death of the shares to someone else, whether through the provisions in a Will or under the laws of intestacy,  could have a significant impact on your business’s stability. The shares might pass to another individual who has little knowledge or interest in the business.


They may even gain significant control of the company and take decisions that may not be in the best interests of yourself and others in the business. Worse, this change of ownership of a significant shareholding, even a minority shareholding, may give cause to the company's bank to call in any outstanding loan facility,


You could always make arrangements within a Shareholders Agreement to force the estate of the deceased shareholder to transfer them to the remaining shareholders, or to the company , at an independent valuation.However, if, at that time ,neither the surviving shareholders nor the company have the funds to make the purchase, the shares will remain with whoever they were passed to under a Will or intestacy.

The other side of this problem  is where the beneficiary to the estate who becomes the owner of the deceased's shares may wish to sell the shares but the other shareholders do not wish to do so?


The solution  to both problems lies in a special form of life insurance based on document giving mutual cross-options. What this does is to ensure that the funds are available either at a pre-agreed figure or as valued on death to enable the shares to be bought back when either the surveying shareholders wish to do so or when  the beneficiary/estate wishes to force the surviving shareholders to buy the shares. Both the estate/beneficiary and the surviving shareholders have the option to force the transfer.

We work with financial advisers to help set up the trust and ensure the Shareholders Agreement binds the company and all shareholders and directors to making the premium payments,  with provision for avoiding non-payment. 








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