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Who will takeover if the controlling shareholder dies?

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What happens in the event of serious illness or death of a controlling shareholder?

Every business should have a plan in place. Normally illness and capacity will not change the voting rights but death will.

Usually the companies articles of association will contain rules which authorise the executors of a deceased shareholder to register as the share owners until they transfer them to the beneficiaries. This is often not the best solution.

A better way is to prepare a shareholders agreement which sets out what will happen.

Its worth considering:

  1. pre-emption rights – these arrange automatic transfer to named shareholders
  2. purchase rights – these will allow the company to buy back the shares from the beneficiaries

If you haven’t got a plan, make one before its too late

steve@bicknells.net


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