Determining if the deceased person held any shares
In the course of ascertaining the deceased’s assets, keep a file of documents that indicate ownership or purchase of shares. Look for Australian Securities Exchange Ltd (ASX) letters, trade platform accounts, share certificates, invitations to Annual General Meetings (AGM), bank accounts, and similar documents.
Private company shares vs public company shares (stock exchange)
2.1 Private Shares
Privately held company shares are not traded publicly via a stock exchange. They require private transactions based on securities legislation and (usually) a shareholders’ agreement containing the procedures, conditions and rules about the transfer of shares. All Proprietary Limited (Pty Ltd) companies will have at least one share issued. These shares may be owned by the founder or owner only, a family trust, employees, friends, family members, board members, partners, or other private investors.
2.2 Public Shares
Public company shares are traded on an established stock exchange (e.g. the ASX), which allows anyone to buy and sell shares in the public market.
What happens to shares when a shareholder dies?
When there is a Will and probate has been granted, if the deceased expressly stated how they wanted their assets distributed, the executor need only comply with the deceased’s instructions and any shareholder conditions (e.g. the disposition of assets after payment of all estate debts or liabilities).
The wishes of the deceased may be that shares are gifted, transferred to beneficiaries, or sold.
1 Gifting shares
The deceased may transfer the shares to a beneficiary as a gift. The executor notifies the broker (for public company shares) or the company (for private company shares) of the shareholder’s death. The executor could be told what supporting documentation is required and pertinent details about the shares and potential dividends.
Different types of securities and shares have different applications and requirements.
If the shares are to be transferred to the executor who is also a beneficiary, the executor must file a separate application and usually a certified copy of the grant of probate.
2 Transferring shares to beneficiaries
The executor and beneficiaries may agree to transfer shares as part of the inheritance, rather than selling them and distributing cash.
Any beneficiary or person inheriting estate assets should keep a record of the transfer of shares for the purpose of understanding capital gains tax implications.
3 Selling shares of a deceased person
The deceased may specify that their shares are to be sold and the distribution of the proceeds of sale. Specific applications and requirements would need to be fulfilled.
The executor or administrator must complete a ‘Transmission Application Form’ which identifies the legal representative and allows the shares to be transferred to the estate before being sold.
What if there Is no Will?
If the shareholder died with no Will (i.e intestate), whether the shares are to be transferred or sold, there could be legal complications or consequences.
An eligible person (including the deceased’s spouse or de facto partner or a close relative) must apply to the Supreme Court of NSW for a grant of Letters of Administration. The applicant then becomes the administrator of the estate (similar to an Executor).
The administrator takes care of funeral arrangements, collects and records assets, and pays off any debts or liabilities. The Succession Act 2006 (NSW) determines how the Estate is distributed.
Shares can also be transferred or sold and the documentation and application requirements are the same as when there is a Will.
What happens when a sole director/shareholder dies?
If the sole director/shareholder of a business dies, an executor can rely on the company’s constitution and the Corporations Act 2001 (Cth), which sets out the laws concerning business entities in Australia. Section 201F(2) of the Corporations Act 2001 provides that if a company’s sole shareholder and director dies, the deceased person’s personal representative (i.e the estate’s executor, administrator or trustee) may appoint another person as a director of the company to continue business operations unless otherwise specified in the company’s constitution.
If there is a Will, the executor can appoint an interim director to run the business pending for a grant of probate, following which the beneficiaries can take control of the company.
If there is no Will, whoever is granted the letters of administration will act as the estate’s administrator. They administer the estate once they receive the letters of administration and will manage the transfer or sale of shares. A grant of letters of administration could take months which can cause problems for the business.
What happens to jointly held shares?
Shares held jointly or co-owned usually do not form part of the deceased estate and pass to the surviving co-owner.
Common documentation requirements
To sell or transfer shares from a deceased estate, the following documents are usually required:
- Death Certificate: This serves as proof of the investor’s death, and is required by stockbrokers and share registries.
- Will or Will extract and probate: For a small number of shares to be disposed or transferred where probate isn’t required, the broker might ask for a certified copy of the Will. But if there are significant shares requiring a grant of probate, you will need to provide the broker with a certified copy of the Will and of probate.
- Letters of Administration: Required for larger sums if the deceased died intestate.
- Small Estate Indemnity form: This must be completed if there is no probate in place. Determined on a case-by-case basis, share registries’ determine the guidelines, with shareholding thresholds varying between $15,000 and $25,000. .
- Intestacy Request and Indemnity form: Administrators may be required to submit this form to the share registry and/or broker if there is no Will and letters of administration is deemed unnecessary.
- Executor’s Identification: Executors and administrators must provide proof of their identity, usually totalling 100 points.
- Deceased Holder’s Identity form: This form must be provided if the shareholder’s share registration details and legal documentation don’t match completely.
- Section 1071B Statement: This form must be submitted if the grant of probate or letters of administration are issued in a different Australian state or territory from where the shares are registered.
Where to now?
Contact us if you need advice or assistance with estate administration.
