Shareholder rights after death

By Tim Lynch

The constitution of a company is the first place to go to find out how voting and other rights attached to shares in the company will be managed after the shareholder dies. Where the deceased made a will, it is the executor/s’ entitlement to be entered into the company’s members’ register that enlivens the executor/s’ right to vote and at general law and under most constitutions a grant of probate is not a condition precedent. Section 1072A of the Corporations Act 2001 (Cth) (Act) is a replaceable rule (i.e. can be modified by the constitution) and it says the company will recognise only the personal representative (executor/s) of the deceased shareholder as being entitled to the deceased shareholder's interest in the shares. If the personal representative gives the directors the information they reasonably require to establish the representative's entitlement to be registered as holder of the shares, they can enter them into the register and they become entitled to the same rights as the deceased shareholder. The information the directors reasonably require often does not include a grant of probate.

Where there are multiple executors, then subject to the constitution, all should be entered as joint shareholders. Section 250F of the Act is also a replaceable rule and it says where a share is held jointly and more than one member votes in respect of that share, only the vote of the member whose name appears first in the register of members counts. This would also apply where there is more than one executor. There is authority that says where joint shareholders agree on which of them should be named first in the register then the company should respect that.

Disclaimer

The above does not constitute legal advice, but is information which may be of general interest. Beswick Lynch Lawyers will not be held liable or responsible for any claim, which is made as a result of any person relying upon the information contained in this publication.