How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Nicola-mod Your Own Question

Nicola-mod
Nicola-mod, Moderator
Category: Law
Satisfied Customers: 11
Experience:  Moderator
73944119
Type Your Law Question Here...
Nicola-mod is online now

Who is the shareholder between the date of death and probate,

Customer Question

Who is the shareholder between the date of death and probate, for the purposes of making up a quorum and voting?
Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.
Hi,

Thank you for your question and welcome.

My name is ***** ***** I will assist you.

Are the shares subject to any automatic transfer notices on death of a member?

Is there any proof, ie a will showing the executor concerned is the executor?

Kind regards

AJ



Customer: replied 2 years ago.

There are no automatic transfer notices on death.


 


The deceased shareholder bequeathed the shares to his wife in his will and, although he nominated an executor in the will, his affairs are sufficiently complex to delay probate by several months so there will be no executor for some time able to exercise any voting powers or to attend a shareholders' meeting.

Expert:  Alex J. replied 2 years ago.
Hi

Thank you.

What type of articles of association does the company have are they Table A or Model Articles?

Do you actually need the deceased shares to make a quorum of the company at a meeting of the shareholders?

Kind regards

AJ

Customer: replied 2 years ago.


The Articles are 1985 as amended with no relevant modifications to Table A.


 


Article 40 therefore provides "No business shall be transacted at any meeting unless a quorum is present. Save in the case of a company with a single member two persons entitled to vote upon the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum."


 


In this case there are two shareholders, the deceased and his wife who has been bequeathed his shares in his will. Because of the delays with probate there is no executor to act on the shares.


 


Although they are still in the registered ownership of the deceased it could be argued that they are beneficially owned by the widow and therefore there is only one member.


 


Likewise, it could be argued that because the shares are in limbo there is only one member (the widow) who is entitled to vote on the business.


 


However, conversely, it could be argued that there remain two members and therefore until probate it will be impossible to form a quorum.


 


I am sure that this situation must have occurred before and there must be some case law deciding the issue.


 

Expert:  Alex J. replied 2 years ago.
Hi,

Thank you.

I understand your concern, and normally you would be correct that the executor would have to show evidence of their appointment in order to allow the company to register them as the temporary owner and then the wife subsequently as owner.

In this circumstance I dont think you need to worry about this. There is such thing as the "Duomatic Principle" in Company law that forgoes the generality of formal company administration where you have informal shareholder approval. This obviously does not apply to certain critical issues where not having the administration would be prejudicial to an interested third party say a creditor (for example s statutory declaration of solvency or a share buy back from capital).

If the only business that the wife needs to undertake is critical and in the best interests of the company and its creditors as a whole, or is in the ordinary course of business, then I think you can do away with the formal administration in this circumstance as she is the only beneficial shareholder.

Also if the wife is absolutely certain she will inherit the shares without challange she could just take all decisions as a company director and then ratify her actions when she takes ownership of all the shares - this is provided for under S.239 of the Companies Act 2006.

There is going to be an element of avoiding formality in any of this if you are not prepared to wait for the grant of probate. However the main thing you have to think about is are the best interests of the company, its creditors and employees, and shareholders being adhered. If the answer is yes, then it makes taking an action informally less risky.

I look forward to hearing from you.

Kind regards

AJ
Customer: replied 2 years ago.
Does this mean that a winding up resolution would be valid?
Expert:  Alex J. replied 2 years ago.
Hi,

Thank you.

A winding up resolution would definitely require you to wait for probate because it directly affects the creditors and shareholders of the company. Allowing the informality principle for winding up resolution could potentially make the directors personally liable for the company debts, if the winding up was insolvent.

Kind regards

AJ

Customer: replied 2 years ago.
It is to be an MVL. Does that make ad offence?
Expert:  Alex J. replied 2 years ago.
Hi,

Thank you.

To pass a MVL you need a special resolution. I cannot see why anyone would want to take on the personal liability of ratifying this or agreeing to it.

I would say the only way you could consider it is if it was a solvent liquidation.

In any event it is likely to cause the executor a problem as the shares will cease to exist once the company is liquidated.

I would strongly recommend waiting if the intention is to liquidate the company.

Kind regards

AJ
Customer: replied 2 years ago.
Shares do not cease to exist when a company is liquidated. The trouble is that the shareholder is short of cash and needs to get the money out of the company to pay her living expenses. If she waits for probate she may starve.
Expert:  Alex J. replied 2 years ago.
Hi,

Thank you.

The share certificates might still exist, but when the company is liquidated, if it is a solvent liquidation then technically the shareholders would be returned their capital, so the shares would cease to exist as the company wouldn't exist.

Does the company have any cash assets? Why does she not get the company to loan her the money?

When she liquidates the company eventually she make distribution of the assets "in specie" and effectively eradicate the loan.

Kind regards

AJ
Customer: replied 2 years ago.
Whilst I note your comments and had already considered that as a practical solution if we cannot resolve it otherwise, I still do not fully understand your stance on the shares. Can you give me chapter and verse?
Expert:  Alex J. replied 2 years ago.
Thank you.

Which part do you require chapter and verse on.

You cannot rely on the informality of shareholder actions for an MVL because it requires a statutory declaration of solvency and a special resolution that has to be filed at companies house.

Kind regards

AJ
Customer: replied 2 years ago.
Why in the circumstances I have described you consider that there are two persons entitled to vote. I understand that the widow is one but who is the other? And why exactly do you come to your conclusion.
Expert:  Alex J. replied 2 years ago.
Hello,

Thank you,

I have looked back at my responses, I did not say that you needed two people to vote. What I essentially said was that if you are putting the company into liquidation by shareholder resolution, them you need a special resolution formally passed and filed at Companies (and ultimately the Insolvency Court). This requires a vote with the correct Qurom at the meeting.

Kind regards

AJ

Customer: replied 2 years ago.

I know all that.


 


What I need to know is whether in the circumstances I have described the widow can form a quorum on her own, being the only person entitled to vote.

Expert:  Alex J. replied 2 years ago.
Thank you.

The articles say the quorum is two, that is clear, there are two shareholders it just so happens that the shares are legally in an estate and your client only has the beneficial entitlement to them.

Why does your client not approach the trustee ask the trustee to conditionally sign over the shares and she can then indemnify the trustee for any losses or liabilities the trustee may suffer?

Kind regards

AJ
Customer: replied 2 years ago.


What trust or trustees are you referring to?


 


I am not sure you understand the question, or the ciircumstances.


 


This is really a matter of who is the shareholder.


 


a) You seem to acknowledge that the widow is the beneficial owner which would indicate that there is only one shareholder so there is a quorum of one.


 


b) You then make the distinction that because she is not the registered propietor of the shares there must be two shareholders and so should be a quorum of two.


 


c) However because there is only one shareholder who is entitled to vote (either becasue she is the sole shareholder under a) above or because the other shareholder is not entitled to vote because he is dead and without probate there is no executor to excercise any vote on his behalf) then it seems to me that the quorum reverts to one.


 


d) However you are appearing to say that it does not, but without giving any reasons in law.


 


e) It is the legal reasoning that I am after. I am not a way around the problem of which there are several, but they each have different complications. I just don't want to incur those added complications unnecessarily which is why I need to be absolutely certain of my legal ground before proceedibg one way or the other.


 


If you are not able to do so then please just say so and we will end it there. Please don't just guess - I can do that!

Expert:  Alex J. replied 2 years ago.
Thank you.

Firstly I was referring to the personal representative of the estate waiting for probate. It the company wants to accept the wife as the legal owner of the deceased husbands shares then they need to be presented with evidence that the personal representative has the power to sign over those shares to the wife. If the personal representative does not have power to do this (as probate has not been granted) then the personal representative obviously signs over legal title of the shares at their own risk. Therefore if the company and wife give an indemnity to the personal representative against any personal liability for doing this, the PR may be prepared to sign the shares over early.

I can assure you I have understood the question. There are two legal shareholders, one is the wife and one is the husband's estate. The wife does not become legal shareholder until the personal representative goes to the company and proves his appointment as a PR and then distributes the estates assets. At which point the company can register initially the PR and then the wife as the legal owner of the shares.

The articles of this company quite clearly say that where there are two shareholders (legal holders of the shares not just a beneficial entitlement) the quorum is two. The estate will be entitled to vote once the Personal Representative has been appointed.

I have said you can informally conduct business of the company on the basis that the wife is 100% beneficial owner of the company. However putting the company into liquidation when you know there is uncertainty over the legal title of the shares is a risk. In order to do this the directors have to provide a statutory statement of solvency and then a special resolution has to be formally passed and filed. You cannot formally pass a special resolution when you do not have someone to vote on behalf of 50% of the voting share capital in the company.

This is really beyond the remit of this service which is only a question and answer, we cannot give substantive advice.

I will opt out this question.

I hope you find the solution you are looking for.

Kind regards

AJ
Expert:  Nicola-mod replied 2 years ago.
Hello,

It seems the professional has left this conversation. This happens occasionally, and it's usually because the professional thinks that someone else might be a better match for your question. I've been working hard to find a new professional to assist you with your question, but sometimes finding the right professional can take a little longer than expected.

I wonder whether you're OK with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.

Thank you!
Nicola
Customer: replied 2 years ago.

I gave up because I asked for a quick answer. I got neither a quick one nor one that provided me with any degree of confidence that it was the correct one. It appeared that your Expert did not understand the question and gave conflicting answers and generally seemed not to understand the point which has still not been answered.


I now have received my credit card statement and believe I have been misled by your statement that I would only have to pay if I was 100% satisfied which I am not.


 


Please arrange an immediate refund.

What Customers are Saying:

 
 
 
  • Thank you so much for your help. Your answers were really useful and came back so quickly. Great! Maggie
< Previous | Next >
  • Thank you so much for your help. Your answers were really useful and came back so quickly. Great! Maggie
  • A quick response, a succinct and helpful answer in simple English. I believe I can now confront the counter party with confidence -- worth the 30 bucks! Rick
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
 
 
 

Meet The Experts:

 
 
 
  • Jo C.

    Jo C.

    Barrister

    Satisfied Customers:

    30316
    Over 5 years in practice
< Last | Next >
  • http://ww2.justanswer.com/uploads/EM/emus/2015-7-7_192327_bigstockportraitofconfidentfemale.64x64.jpg Jo C.'s Avatar

    Jo C.

    Barrister

    Satisfied Customers:

    30316
    Over 5 years in practice
  • http://ww2.justanswer.com/uploads/BE/benjones/2015-12-1_0437_ennew.64x64.jpg Ben Jones's Avatar

    Ben Jones

    UK Lawyer

    Satisfied Customers:

    11553
    Qualified Solicitor - Please start your question with 'For Ben Jones'
  • http://ww2.justanswer.com/uploads/BU/Buachaill/2012-5-25_211156_barrister5.64x64.jpg Buachaill's Avatar

    Buachaill

    Barrister

    Satisfied Customers:

    1754
    Barrister 17 years experience
  • http://ww2.justanswer.com/uploads/JO/jojobi/2013-3-19_0265_maxlowryphoto.64x64.jpg Max Lowry's Avatar

    Max Lowry

    Advocate

    Satisfied Customers:

    894
    LLB, 10 years post qualification experience
  • http://ww2.justanswer.com/uploads/UK/UKLawyer/2012-4-12_9849_F2.64x64.jpg UK_Lawyer's Avatar

    UK_Lawyer

    Solicitor

    Satisfied Customers:

    750
    I am a qualified solicitor and an expert in UK law.
  • http://ww2.justanswer.com/uploads/KA/Kasare/kasare.64x64.jpg Kasare's Avatar

    Kasare

    Solicitor

    Satisfied Customers:

    402
    Solicitor, 10 yrs plus experience in civil litigation, employment and family law
  • http://ww2.justanswer.com/uploads/OS/osh/2015-7-7_19268_gettyimagesb.64x64.jpg Joshua's Avatar

    Joshua

    Lawyer

    Satisfied Customers:

    8199
    LL.B (Hons), Higher Prof. Dip. Law & Practice