Businessmen who have built a successful company will usually want to leave this to their family on their death. What many are not aware of, however, is that the vast majority of companies contain restrictions in their Articles of Association that prevent a smooth transfer of those shares to their family.
Directors of a company can refuse to register any transfer of shares lodged by a deceased shareholder’s Executors. They are required to provide a written statement of their reasons for refusing to register the transfer within 2 months but there is no need for those grounds to be “reasonable”.
While a transfer can be rejected by the Directors they can’t withhold dividend payments to the Executors. However, as any business owner knows, it is possible to manipulate company finances to leave very little available profit for distribution to shareholders (by increasing management charges and so on).
So, as matters stand many companies are currently structured so as to leave open the possibility of serious problems arising on the death of a shareholder. Bereaved relatives may be blocked from being recognised as the owners of the shares and may end up with little or no income coming their way from the company.
Unfortunately, without a proper review of the Articles of Association now, problems may only become apparent when it is too late. Here at Sutton McGrath Hartley we have the skills and expertise to advise you on your company’s position and to provide the solutions you need to ensure that shares can be passed down the generations without any nasty surprises.
Sutton McGrath Hartley is a multi-disciplinary firm of Accounting & Business Advisory, financial advisers and lawyers offering comprehensive financial expertise for all business, personal and family interests. Our specialist departments can help with accounts, tax, financial planning, wills, trusts and estate planning. To discuss your requirements please contact Ben Schofield on 0114 266 4432 or wills@smh.group.
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