The shareholding of the deceased person forms part of their estate and how this is distributed will depend on whether he/she died in testate (the deceased having a will in place) or intestate (person has passed without a will).
Testate
Under the assumption a will is in place, it would be the duty of the Executor (the person/persons named in the will to deal with the person’s affairs after their death) to be entitled to take out probate in order to deal with the transmission of the person’s shareholding.
Intestate
If the person has passed intestate, a grant of representation should be sought in order to deal with the shareholding. Once the grant is issued the Administrator(s) of the estate have the authority to deal with the transmission of the shareholding.
When a person has passed intestacy, Section 67(1) Succession Act states that if a spouse dies leaving no children, the surviving spouse takes the whole estate.
While Section 67 (2) of the Act states that if a spouse dies leaving a spouse and children, the surviving spouse is entitled to two thirds of the deceased’s estate and the remaining one third of the estate is divided equally or per stirpes, i.e. does not inherit in an individual capacity but as a member of a group.
Personal Representative
Ownership of a deceased shareholder’s shares will vest with their personal representative from the date of their passing. The personal representative is the Executor of the estate or the person/persons administering the estate.
The company secretary should require sight of either the original or an official copy of the grant of probate or grant of representation. The Secretary should then confirm the personal representative’s identity against the grant of representation or grant of probate, if there is any doubt of their identification, the Secretary should request a declaration of identity from the personal representative.
Who holds the shares on passing of a shareholder?
Unless the Constitution or a Shareholder’s Agreement provided says otherwise, the Personal Representative may decide to enter into the register their own name. If this is the case, they would need to give in writing to the Company this intention. The Register would need to be updated accordingly on confirmation of their identity and no stock transfer form would be required.
Under Section 96(4)(b) CA2014 the Personal Representative may elect someone else, in this case the stock transfer form will need to be completed and executed with the Personal Representative signing off on behalf of the deceased shareholder and the Register Updated accordingly.
In any event it should be noted that the spouse is not automatically entitled to the shareholding nor if there is a will have they automatic right to be Executor.
Initial Steps for the Secretary when they are inform of the passing of a shareholder
Once the Secretary is informed that a shareholder has passed a note should be left on the Register of members. This should be updated regardless if the grant of probate or grant of representation has been issued.
On receipt of the original share certificate, the Secretary should include, the shareholder’s date of passing, information from the grant of representation/grant of probate including the name and address of the personal representative should be noted on the back of the original certificate.
The Company’s constitution or shareholders agreement should be reviewed for any specific clauses or procedures relating to transfer of shares when a member has passed.
Steps to Transfer the Shares when the Personal Representative is Transferring their shares to someone else;
A Meeting of the Directors should be held to approve the transfer of shares and note evidence supporting the Personal Representative and Transmission of the Shares. The Meeting should conclude with the authorisation to issue the new share certificate to the transferee. For best practice, a balancing certificate should also be issued to the representative of the deceased.
The stock transfer form should be executed by the personal representative of the deceased with evidence of their appointment attached to the form alongside evidence of the authority of the transferee entitlement to the shares e.g. Grant of probate or Grant of representation.
For larger estates, a Copy should be taken of the grant of probate and the original or official copy of the grant of probate should be stamped with the Company seal and returned to the personal representative.
The completed stock transfer form and original share certificate should be sent to the company for registration. The Secretary should then update the Company’s Register, Beneficial Owners Register and Register of Beneficial Owners (RBO).
How to update the Register
Upon receipt of the completed stock transfer form and related documentation, the follow should be completed on the Register;
- the date of death of the deceased,
- date of registration of probate,
- the name(s), address(es) and evidence of the personal representative,
- the deceased members name should also be updated with ‘(deceased)’,
- and, the deceased person’s residential address updated to C/O Executor or Administrator followed by their postal address.
It is important that the grant of probate or grant of administration has been issued prior to any of the above steps being taken. Any photocopies of the probate or grant of administration should be authenticated by a solicitor or commissioner of the oaths to be a true copy.
Notes
If the Company Secretary has received notice from more than one individuals that they are the Personal Representative, the Secretary should request evidence of their appointment, in some cases this may include obtaining be a letter from the legal authority dealing with the estate.
Personal Representatives should be issued Notices for any meetings their shareholder was entitled to attend.
Ownership of a deceased shareholder’s shares will vest in his/her personal representative from date of death.
Where the Secretary is given a Grant of representation it does not require sight of the death certificate.