Limited Company

The issues.

Companies continue after a shareholder’s death, but the basic succession issues are similar to those facing a partnership. The key is to make sure that the shares end up with the surviving shareholders and the deceased shareholder’s family receive some money. Generally, the deceased shareholder’s beneficiaries will want financial compensation in return for their shares, assuming that they do not plan to continue in the business.

 The solution A cross option agreement is often used for company shareholder succession planning. If shareholder A dies, their beneficiaries can require the remaining shareholders to buy them out or the remaining shareholders can require the beneficiaries to sell their shares. One advantage of cross options is that they do not affect entitlement to inheritance tax business assets relief. So the deceased person’s shares pass down to the estate tax-free – unlike most other assets.