Death of principal director/shareholder intestate

[Equus]

Does anyone have any experience of how to deal with a situation where the main shareholder and 'kingpin' Director of a company dies intestate?

The scenario would be that the junior Directors don't really have a full grip on what's going on financially, or how to run the company.

Is it fairly easy for them to wind the company up (assuming it's nicely solvent) without too much trouble, or is everything put on hold until the assets of the deceased are sorted out?

[Equus]

In theory, yes (no one is indispensable). In practice, no - the other Directors lack the necessary knowledge and experience.

[Equus]

Three, and no.

[Equus]

80% to the deceased, 20% to others (and no clause in the Articles of Association preventing transfer of shares to others, for what it's worth).

[Equus]

No

[Equus]

BrabusMog said:

What does the shareholders agreement say?

"Shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the directors, which is executed by or on behalf of the transferor."

"The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent."

[Equus]

I don't know yet - I'm trying to establish what their options would be. I suspect that they would probably prefer to cease trading and liquidate the company with as little fuss and bother as possible.

[Equus]

As stated above, there are no widow or kids.

The company is perfectly solvent (£10's of K sitting in its bank accounts, no debts), so the question would be whether the remaining Directors could simply wind the company up, and divide that money amongst themselves and the deceased's estate, before the intestacy is resolved.

[Equus]

TooMany2cvs said:

No siblings, no surviving parents, no aunts or uncles, no relatives AT ALL?

That's not what I said... I said no wife or kids.

There are surviving siblings and parent (who likewise would have no ability or interest in continuing the company), but I am aware that in such circumstances it takes a long time to sort out the intestacy. It would be in everyone's interest to wind the company up immediately, to minimise ongoing costs, if it were possible to do so.

[Equus]

TooMany2cvs said:

The shares are part of his estate, and follow the usual intestacy rules, so probably his widow or kids.

...covers who now owns the shares.
Covers who WILL own the shares, once the intestacy has been resolved, is my understanding.

My question is what happens in terms of control of the company, during the intestacy period; ie. can it be wound up?

[Equus]

FiF said:

... the whole essence of the business hinged around the particular talents of the principal.

This, essentially.

[Equus]

OK, brilliant - that seems clear, at least!

Thanks all!

[Equus]

Eric Mc said:

Yes, Cyberborg's advice could land you in trouble pretty pronto.

Yes, even I'm not daft enough to think that simply issuing more shares to dilute a previous majority shareholder out of control would be legal!

Fortunately, I don't anticipate any arguments or resistance, in this case - everyone will just want it sorted ASAP.

Cheers, chaps!