Death of a shareholder: who owns the shares?

Here at SeedLegals, we sometimes get asked what to do when a shareholder dies. No matter how close you were to the shareholder who’s passed away, it’s a difficult time. Especially so of course for their family – who have the extra burden of the mountain of tedious admin. 

In these situations, you’ll want to help get things sorted out as quickly as possible so you’ll need to become familiar with the relevant legal procedures. In this article, we set out the general rules about share ownership when a shareholder dies.

Shares pass to the ‘personal representative’

The entire estate of the deceased will be administered by a ‘personal representative’ – the PR.

• If the deceased left a will, the PR can be named in a will – if so, the PR is known as the ‘executor’.
• If the deceased didn’t leave a will, an administrator is appointed as the PR.

The ownership of the deceased’s shares passes to the PR – this is called the ‘transmission’ of shares.

However, this transmission isn’t a run-of-the-mill share transfer. By law, it happens automatically so a J30 form (Stock Transfer form) isn’t necessary.
Importantly, PRs don’t automatically become shareholders – they can choose to be registered as a shareholder, which is common where the PR is a spouse or another heir. Or, the PR may choose to transfer the shares to an heir of the deceased.

Usually PRs leave the shares registered in the deceased’s name during the administration of the estate, and afterwards they become a shareholder themselves. Then they’d transfer the shares to beneficiaries identified in the will, or sell the shares to a third party.

Check your company’s Articles

It’s important to check your company’s Articles of Association because it might contain provisions which could affect what the PR can do with the shares. For example, do the directors have the right to refuse to register a transfer? Or are there pre-emption provisions?

The provisions in your Articles could restrict or inhibit a PR’s right to be registered as a shareholder or to transfer the legal title of shares from the deceased to the beneficiary named in the will.

Request proof and register the new shareholder

Before the new shareholder can be entered into your company’s register, you must receive – and you’re obliged to accept – any document that’s sufficient evidence of probate or administration of the estate. This is the required proof that the PR is entitled to the deceased shareholder’s shares.

Most Articles of Association, including the Model Articles, have provisions setting out the procedure for registering a new shareholder.

Consult a specialist

It can be tricky to work out what to do with the deceased’s shares so we recommend that you and the PR talk to a probate specialist or lawyer.

Make sure you have your company’s Articles of Association ready to share with the PR and probate specialist.

We’re here to help

If you’re a SeedLegals member and one of your shareholders has died, click the chat button (bottom right of this screen) to message our team – we’ll be happy to introduce you to a trusted family lawyer who can advise on what’s possible so you can decide what’s best to do.