If a business owner was to die without leaving a Will, who will inherit his interest?
The business or shareholding could pass to:
- Individuals already in dispute about the future of the company and how the business should be run.
- Individuals who don’t want to retain the company and have no interest in running it
- Individuals without the knowledge, skills or experience to run the business
What if the inheritor of the interest wants to sell on that interest but no other party is interested in buying it, or the inheritor wants to sell that interest to someone at a rival company? As well as creating tension within and between families, such scenarios can lead to serious disruption within a business and threaten its ongoing success.
Business owners and shareholders should carefully consider what may happen to their interests after death and who they wish to inherit. A well written Will can ensure that shares are passed on correctly in a tax efficient manner and will take into consideration other documents relating to the business which might impact on the operation of the Will.
If you own an interest in a partnership, the Will writer should check the terms of the partnership agreement. This agreement can affect what happens to your interest when you die, so it is important to be familiar with the terms before making your Will.
With shares in a company, the company’s articles of association should also be reviewed to ensure that they don’t conflict with the terms of the Will. If the company has a shareholders’ agreement, this will also need to be examined for provisions of which restrict the passing of shares under a Will. In some cases, changes to the relevant documents may be required to enable the shares to be passed on in accordance with the shareholder’s wishes.
More generally, it’s important to consider whether or not the inheritor would want to get involved with a business before leaving any interest to them. If they are likely to just sell it or pass it on to someone else, there might be more efficient ways to pass on the value of that interest.
Our private client team work closely with our colleagues in the corporate team to provide a range of services to commercial clients which address these issues and clarify the situation for all involved.
Solutions may include cross-option agreements which ensure shares can be sold or bought on the death of a shareholder in a tax-efficient manner alongside trust Wills to ensure business assets are protected on death and that the business can continue to operate.
We believe being able to offer tailored advice gives peace of mind to the individuals involved. It also gives companies a greater degree of certainty for the future that they can continue to grow.