Where There Is A Will - Transmission Of Shares By Operation Of Law

• Published date: 04 April 2024
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Shareholders
• Law Firm: B&P ASSOCIATES
• Author: Ms Michelle Nana Yaa Essuman and Olga Adjo Quarshie

Introduction

Companies have two options when it comes to raising capital - debt or equity. Equity involves issuing shares, which are ownership rights, benefits, and resources issued by a company to a person for consideration either in cash or otherwise than in cash¹ .

These shares are the property of the shareholder and can be transferred to another person subject to any valid restrictions provided in a Shareholders Agreement, if any, the Company Constitution and/or any relevant documents.

Acquisition of Shares

There are four ways to acquire shares :² subscription at incorporation, subsequent purchase from the company, share transfer from existing shareholders, and transmission by operation of law.

The latter refers to a transfer premised on the death, bankruptcy, or insolvency of a shareholder. In the case of the death of a shareholder with a will, it is important to follow the appropriate process for the transmission of shares. Understanding the legal requirements for this process can help ensure a smooth transfer of ownership.

Transmission by Operation of Law: in the instance of the death of a testate shareholder

Transmission of shares by operation of law upon the death of a testate shareholder is an important legal process that must be followed. It is effected without consideration paid by the transferee.

Section 102 (1) of Act 992³ outlines the steps that a company must take to recognize the legal representative of a deceased shareholder. This includes recognizing the survivor(s), personal representatives, or a beneficiary vested with the shares of the deceased shareholder.

However, it is important to note that this recognition is not an automatic and the Company must undergo some processes in order to register the shares in the name of the beneficiary. Recognise legal representative of a deceased shareholder before final registration in the name of a beneficiary.

The Recognition Process

Upon the death of a shareholder, the relevant executor is required to apply for probate which grants authority to deal with the estate of the deceased (including the shares).⁴ This includes disposing or transferring shares of the deceased according to the Will of the deceased.

Once probate is obtained by the executor, the original or certified true copy must be submitted to the company for acknowledgment and registration. ⁵

Subsequently, the executor is granted access to either elect for the shares to be registered in their own name pending distribution to the...