Shareholding and Your Estate Plan
When planning your estate, one crucial element that business owners often overlook is what happens to their shareholding in a proprietary company after they pass away. Whether you run your own business or co-own one with others, understanding how your shares are dealt with in your estate plan is critical to protecting your business legacy and ensuring continuity for those you leave behind.
What Kind of Shareholding Are We Talking About?
This article focuses on proprietary company shares—that is, shares in a private business you control or co-own—not retail shares in public companies like BHP or Telstra. These business shares are typically part of a family business, professional partnership, or company you’ve built over time.
What Happens to Your Shares When You Die?
The outcome largely depends on your circumstances and the legal structures in place:
Joint Shareholders: If shares are held jointly (often with a spouse or co-founder), the surviving shareholder usually inherits the shares automatically.
Individual Shareholders: If you hold shares in your sole name, those shares form part of your estate. They will be distributed according to your will—or, if there is no valid will, under the rules of intestacy.
Co-owned Shares with No Agreement: If you're in business with others and don’t have a shareholders agreement, there may be no clear path for what happens to your shares on death—leaving your family and business partners to deal with uncertainty, delays, or even disputes.
Why a Shareholders Agreement Matters
A well-prepared shareholders agreement is one of the most powerful tools in business succession planning. It sets out what happens to your shares if you pass away and how they may be transferred, sold, or inherited. It can also specify:
Whether your business partners can purchase your shares from your estate;
How your shares should be valued;
Who can (or can’t) inherit shares;
Any conditions for selling or passing on your ownership.
In the absence of an agreement, your shareholding could become a source of tension or even legal action—especially if your business partners and your beneficiaries have different expectations about what should happen next.
What If Your Children Aren’t Interested in the Business?
Many business owners assume their children will take over one day. But in reality, your children may be too young, uninterested, or unqualified to step into the business. Others may want to sell their share and move on.
If you haven’t created a plan to address this, it can be difficult for your estate to manage the transition—particularly if the business relies heavily on your leadership or expertise.
This is where it becomes crucial to:
Identify whether your shares should be sold;
Choose a preferred buyer (e.g. a co-owner, trusted employee, or third party);
Put a process in place to manage the transition, such as through a buy-sell agreement or clear will provisions.
Start the Conversation Now
Talking about death isn’t always comfortable—but having a clear, honest discussion with your business partners and family is essential. You need to know that everyone understands your intentions and that your wishes are legally documented.
If you have co-owners, start by asking:
"What happens if one of us dies?"
Once you're aligned, formalise the agreement and ensure your estate plan reflects that arrangement. It’s one of the most responsible and protective steps you can take as a business owner.
Your Next Steps
If you’re a business owner and haven’t reviewed your shareholding arrangements, now is the time. You don’t need all the answers right away—but you do need a plan. At Vicca Law, we regularly help clients structure their estate plans to include business succession strategies that work in the real world.
Whether you run a growing business or you're preparing for retirement, we can help you protect what you’ve built.