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Newsletter 45

Newsletter 45


Dear Colleague
 
Life is short.
Smile while you still have teeth.
 
We are quickly approaching the annual holiday season. November is also Disability Rights Awareness month.
 
This is a great opportunity to ensure that your clients’ Wills are in order. Make sure that those who have children with special needs, make provision for their wellbeing in their Wills by creating a testamentary trust. This will give clients peace of mind, knowing that their children will be taken care of properly after they have passed on.
 
Remember to return all original signed Wills to Legatus Trust for safe keeping.  Apart from the fact that it will be stored safely, it also contributes to your points in the Legatus competition which will end on 30 November 2020. Be on the look-out for power of attorney estates which Legatus Trust could administer as the agent.
 
 
AMENDING A WILL AFTER A DIVORCE
Read more about this in the next edition
 
 
WHAT HAPPENS TO COMPANY SHARES IN A PRIVATE COMPANY WHEN A SHAREHOLDER DIES?
 
An estate consists of various assets, which could include a shareholder’s shares and loan account in a private company.
 
When a shareholder dies, the right to his/her interest in the shares, will pass over to whoever inherits them under his/her Will or intestacy. This may sometimes not be to the best advantage of the remaining shareholders of the company.  It is therefore wise to make plans before the death of a shareholder to prevent uncertainty and the risk to the business arising upon the death of a shareholder.  It is not something that grieving relatives or co-directors should have to deal with after death.
 
Generally, the law determines that shares should be transferred to the heirs of the deceased, but this can have unintended consequences. There are a few possibilities when heirs inherit shares:
  • The heirs may have no interest in the business or even hold shares in the company;
  • Heirs might not be interested in running the company; or
  • Heirs might be interested in running the company, but do not hold the necessary qualifications or have the experience to do so.
The remaining shareholders could also end up with unplanned and unwanted shareholders and this could affect the future productive operation of a successful business or even result in the dissolving of the company
.
It is common practice that the remaining shareholders buy out the shares of the deceased. But this also present its’ own set of problems and unwanted consequences and complications.
  • Remaining shareholders could lack the funds for a buy-out, or
  • The heirs may be unwilling to sell, leaving the remaining heirs as successors in title to the shares, with the possibility of a sell-out to third parties.
Corporate governance determines a company should be governed, accountability and preparing for the future. A corporate governance plan should also determine how shares will be disposed of in the event of the death of a shareholder. A written shareholders’ agreement is imperative and should contain all the necessary provisions relating to the disposition of shares in the event of death.  It should also include methods for the valuation and sale of such shares, pre-emptive rights between the shareholders, the procedure to be followed upon the death of a shareholder and even provisions regarding policies on the lives of the shareholders.  This is the first step to a smooth transition with minimal disruption to the normal operation of a business.  A commercial attorney will be able to draft this type of agreement.
 
Like a Will, the shareholders’ agreement should be regularly updated.  It should be reviewed to ensure that it is still relevant and holding up to the changing circumstances in a company.  Especially when there is a change in shareholding, as well as to ensure that it is compliant with the latest laws and company’s memorandum of incorporation.
 
The worst possible case is for this situation to be unresolved upon the death of a shareholder.  Care should be taken that the provisions in the Will relating to the bequest of the shares should not conflict with the company documents or agreements.
 
Source: Tonkin Clacey Inc.
https://www.tcinc.co.za/NewsResources/NewsArticle.aspx?ArticleID=2972&Type=Primary
 
 
My Credo of Life
 
Let me live within the moment.
Let me feel all that I can.
Let me cherish life for all it’s worth,
With everything I am.
 
May I wake each day with gratitude,
For all my life may be.
And always feel that wonderment
At the world surrounding me.
 
For the moment now is everything,
Nothing matters but today.
So I’ll willingly embrace it
And not let it slip away.
 
For it passes all so quickly,
And one chance is all we get.
And a life of wasted moments.
Is a life filled with regrets.
 
Extracts from Pat A. Fleming’s poem: My Credo of life.
Read full poem at https://www.familyfriendpoems.com/poem/my-credo-of-life
 
 
Until next time.
“The Legatus Times” Team
 


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