What Happens if a Shareholder Dies?

By Vanessa DeDominicis

I have a lot of corporate clients. These clients often have small businesses, or sometimes large businesses that they are one of many shareholders in. Who has the right to inherit these shares when the shareholder dies? If the shareholder has a Will, then these shares will be administered by the Executor of that Will and pass through the shareholder’s estate.

Any business owner, small or large, should make sure they have advance planning in place to determine what will happen to the shares in a private company in the event that one of the shareholders passes away. It is in the best interests of company directors, owners and their family members to resolve this ahead of time and have intentions properly documented.

It is not something that grieving relatives and remaining directors should have to deal with after a death. As a surviving business owner, do you really want to suddenly own a business with your deceased partners soon to be ex-wife? Not only awkward, but potentially catastrophic for any business. There are several different arrangements that can be made by business owners ahead of time, to avoid issues.

A Shareholder’s Agreement is a popular solution. These often include clauses that allow existing shareholders to buy out the deceased shareholder and pay proceeds to the estate.

If you own a business, it is crucial to obtain legal advice on these issues.

This is provided as information ONLY; it should NOT be construed as legal advice. You should consult with a lawyer to provide you with specific advice for your own situation. For more information on estate planning/incapacity planning and to discuss your specific circumstances, please contact Vanessa DeDominicis on 250-869-1140 or dedominicis@pushormitchell.com Vanessa practices in the area of Wills and Estates at Pushor Mitchell LLP in Kelowna.