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:
- pre-emption rights – these arrange automatic transfer to named shareholders
- 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