What happens to a company after its owner dies

What happens to a company when its owner dies? Inheriting a company is a specific type of probate proceedings governed by special rules. First of all, it has to be established whether the ownership interest forms part of the estate. If it does, it is inherited either by operation of law or under a will.

INHERITING AN OWNERSHIP INTEREST BY OPERATION OF LAW

If the deceased did not leave a will, the ownership interest is inherited by operation of law. The heirs are determined by classes of heirs. In the first class, the children of the deceased inherit; in the second class, the parents of the deceased inherit; in the third class, the siblings of the deceased inherit; and in the fourth class, other heirs inherit.

INHERITING AN OWNERSHIP INTEREST UNDER A WILL

If the deceased left a will, the ownership interest is inherited under the will. In the will, the deceased may appoint an heir to the ownership interest or may specify that the ownership interest is to be transferred to another person.

CAN INHERITING AN OWNERSHIP INTEREST BE PROHIBITED? WHEN INHERITING AN OWNERSHIP INTEREST IS PROHIBITED

The company’s memorandum of association may contain a provision prohibiting the inheritance of the ownership interest. In that case, the deceased shareholder’s ownership interest does not pass to the heirs but to the company. The company may transfer the ownership interest to another shareholder or to a third party.

THE PROBATE PROCEDURE FOR A COMPANY

Probate proceedings concerning a company begin with the filing of a petition to open probate proceedings with the competent court. The petition may be filed by any heir, the surviving husband or wife of the deceased, or the administrator of the estate.

The petition must state:

• the first name and surname of the deceased,
• the date and place of death,
• a list of the assets the deceased left,
• a list of the heirs.

If the ownership interest is inherited by operation of law, the petition must also include a list of the classes of heirs and the heirs in each class.

If the ownership interest is inherited under a will, the petition must state whether the deceased left a will and what provisions it contains.

Once the petition to open probate proceedings has been filed, the court opens the probate proceedings and invites the heirs to comment on the petition. The court may also order an expert valuation to determine the value of the estate.

After examining the petition and the heirs’ statements, the court issues a resolution on the inheritance. In the resolution, the court decides who the heirs are and to what extent they inherit the ownership interest.

If the ownership interest is the subject of probate proceedings, the heirs must accept the inheritance. An inheritance is accepted by the heir making a declaration before the court or a notary.

WHEN THE OWNERSHIP INTEREST IS THE SUBJECT OF PROBATE PROCEEDINGS BUT THE HEIRS DO NOT WANT TO INHERIT IT

If the heirs do not want to inherit the ownership interest, they may disclaim it. An inheritance is disclaimed by the heir making a declaration before the court or a notary.

If the heirs disclaim the ownership interest, it passes to the heirs in the next class. If there are no heirs in the next class, the ownership interest passes to the state.

Probate proceedings concerning a company are a fairly complex process that needs careful consideration. If you are interested in inheriting an ownership interest, it is advisable to consult a lawyer or a notary.