Can I Leave Company Shares in My Will?

For a shareholder who owns all or most of a company, and where there are no other shareholders whose rights could be affected, leaving shares in a will is usually a simple specific gift, naming the company, the number and class of shares, and the intended beneficiary. If you hold shares of different classes, for example ordinary and preference shares, identify each separately if you want them to go to different people.

It is worth checking company records before finalising this wording, since share numbers and classes can change over time as a business grows, takes on investment, or reorganises its share capital, and out of date wording can cause confusion for your executors.

Before relying on a gift of shares in your will, check the company's articles of association and any shareholders' agreement for provisions dealing with transfer or transmission of shares on death. Many private companies restrict who can become a shareholder, and some include pre-emption rights requiring shares to be offered to existing shareholders before an outside beneficiary can receive them.

If these restrictions would prevent your intended beneficiary from actually holding the shares, your gift may not achieve what you want, and your estate could instead receive a cash value determined by the buyout mechanism in the agreement rather than the shares themselves. It is far better to identify this in advance than to leave your executors and beneficiaries to discover it after your death.

In some cases it is more realistic, and sometimes more desirable, to plan for your estate to receive the value of your shares in cash rather than for a family member to actually become a shareholder, particularly where other shareholders would not welcome an unfamiliar co-owner, or where your intended beneficiary has no interest in or knowledge of the business.

A cross-option agreement, backed by life insurance, is the standard way to achieve this: it gives your co-shareholders the right to buy your shares, and your estate the right to require them to, at a fair value, funded by the insurance proceeds. This gives your family financial value quickly, while letting the business continue under its existing ownership without disruption.

Make sure your will, the company's register of members, any shareholders' agreement and any cross-option agreement are all telling a consistent story. Inconsistencies, such as a will referring to a shareholding you no longer hold in that form, or a will attempting to override a binding pre-emption clause, create real problems for executors trying to administer the estate.

Review this whenever there is a significant change, such as a new investor joining the company, a change in your own shareholding, or an update to the shareholders' agreement, rather than treating your will as fixed once written.

If you are the sole shareholder of a straightforward company with no restrictive documents, a specific gift of your shares can usually be included in a well-drafted online will without difficulty.

Where you have co-shareholders, a shareholders' agreement, or want to set up a cross-option arrangement, involve a solicitor experienced in business succession, since the company law and drafting involved goes beyond what a standard will template is designed to handle.