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What happens to the shares when a shareholder dies?

My answer to What happens to the shares when a shareholder dies?

Answer by Raad Ahmed:

To answer your question, something will happen to a deceased shareholder’s shares they simply do not sit in limbo. How the shares of a deceased shareholder will be disposed of depends on two broad areas the content of corporate by-laws and shareholder’s agreements and the decedent’s estate plan.

Corporate bylaws or a shareholders’ agreement will dictate what happens with a deceased shareholder’s shares. However, it is important to note that if a majority shareholder dies, the corporation will continue to exist. If there is no agreement in place, the shareholder’s shares pass according to his or her estate plan. If the individual dies without a will, the shares will pass according to rules of intestacy that state the deceased estate first passes to the most immediate next of kin in equal shares, if these individuals are not living then distribution moves to more remote relatives.

In sum, the best strategy in the event of a shareholder’s death is to understand that some form of succession will occur however it is important to avoid unplanned consequences of a shareholder’s death by implementing shareholder agreements that designate succession of shares.

It’s best to speak with a lawyer to get guidance on your specific circumstance. When ready, feel free to check you LawTrades. It’s a marketplace that connects businesses to highly vetted attorneys to on-demand, flat-fee legal work.

Good luck.

What happens to the shares when a shareholder dies?

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