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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

Why would you liquidate a solvent company?

Balance sheet business diagram

If you have a company which is no longer needed you have the following options:

  1. You can just keep it as a Dormant company
  2. You could strike it off at Companies House
  3. You could carryout a Members Voluntary Liquidation

If the company has assets the shareholders will want to release the assets and get hold of the money, so keeping it Dormant isn’t going to help.

Since March 2012, in the case of Strike Offs, ESC C16 has allowed the distribution of up to £25,000 as a Capital Distribution rather than as Income.

However, if you have assets in excess of £25,000 distributions can only be treated a Capital if the distributions are made through a formal liquidation.

With Entrepreneur’s relief, money paid to shareholders will only be subject to tax at 10% on the capital gain.

There could also be other benefits too.

steve@bicknells.net

 

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