What happens to limited company shares on the death of a shareholder?

A limited company is a separate legal entity owned by its shareholders; therefore the business assets are separate from a shareholder’s personal assets.

Providing there is a valid and binding shareholders agreement in place, this should outline what happens when a shareholder passes away. 

If there is no shareholders agreement in place, the shares would pass according to the last Will and Testament of the shareholder, or if there is no Will in place, according to the rules of intestacy. 

In circumstances where there is a valid shareholders agreement and a valid Will in place, but there is a conflicting provision in the Will, the shareholders agreement takes precedence. 

If the shareholder is also a director of the company, providing there are other directors appointed at their death, the business can continue to run normally. The remaining directors could, if they choose to, appoint another director to act in the deceased’s place.

If there is only one director, but more than one shareholder, the remaining shareholders can appoint a new director. 

In situations where there is only one director and shareholder, the deceased’s personal representatives have the ability to appoint a new director.  

It is strongly advisable that shareholders check the company’s articles of association as these will include important terms regarding how the company should operate in the event of a death of a director/shareholder. 

If you are minority or majority shareholder in a limited company, we strongly advise you ensure you have an up-to-date valid Will in place. If you would like assistance in drafting your Will to ensure your shares are left according to your wishes, and as tax efficient as possible, please contact our team. 

How can Charlton Baker help you?

Here at Charlton Baker we are qualified do deal with all of your Wealth, Will and Probate matters. Please visit our Wealth, Wills & Probate Services page, or contact us for more information. 

Other topics you might find useful:

Why do I need a Will?
Characteristics of a valid Will
How often should I change my Will?
How do I choose an executor for my Will?
What is probate and how does it work?
Why do I need a Lasting Power of Attorney (LPA)?