Why companies need wills
25th March, 2015
Fast-growing companies are frequently too focused on the present and the immediate future to spend too much time considering "what if" scenarios.
However, after 15 years as a lawyer specialising in wills, trusts and inheritance matters I find that such scenarios sadly crop up all too often – and can have serious consequences not only for individuals but also for the companies which they are involved in.
Of course, no-one likes to spend time contemplating what may happen after they have died, but in the case of important people within companies – particularly shareholders – the issue is one which deserves some serious thought.
For example, if a company director was to die without leaving a Will, who will inherit his shares?
Will the person who eventually receives those shares want to play an active part in running the company and, if they do, what happens if they want to take it in a completely different direction to the other shareholders?
What if the inheritor of the shares wants to sell them on but no other shareholders are interested in buying them or if the inheritor wants to sell shares to someone at a rival company?
Naturally, as well as creating personal issues, such scenarios can lead to serious disruption within a company and threaten its ongoing success.
Similar problems can arise in cases where directors and shareholders have issues with mental capacity – if an important figure in a company succumbs to such a condition, how will vital decisions be made about the business and who should make them?
The situation can be exacerbated in cases involving a family business where the lines between personal and business lives are blurred even during better times.
It is for all these reasons that forward-thinking businesses prepare for the worst, even when concentrating on growing their companies.
In Ward Hadaway’s Wills and Trust team, we work closely with our colleagues in the Corporate team to provide a range of services to commercial clients which address these issues and clarify the situation for all involved should those “what if” scenarios come to pass.
These include things like cross-option agreements which ensure shares can be sold or bought on the death of a shareholder in a tax-efficient manner, preparing Wills for clients with business assets to ensure those assets are protected on death and that the business can continue to operate in their absence and preparing Commercial Lasting Powers of Attorney to ensure that somebody can continue to run the business should a company director suffer capacity issues.
Not only can such agreements and others covering issues such as inheritance tax, pensions and trusts give peace of mind to the individuals involved, they also give companies a greater degree of certainty for the future that they can continue to grow, to create wealth and to generate prosperity.
* This article first appeared in a supplement on the Yorkshire Fastest 50 Awards 2015.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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