One of tasks of an executor during the course of administrating someone’s estate, is identifying and keeping a record of all the deceased’s assets and liabilities.

During this step, the executor may find that the deceased held shares (in either a private or publicly listed company) and start to question how to they ought to deal with them.

How do I determine if the deceased held any shares?

Sometimes executors may be faced with a situation where they have no idea if deceased person held any shares. When searching through the deceased’s personal records, things to look out for, include:  

• shareholder agreements;
• Australian Securities Exchange Ltd (ASX) letters;
• share certificates;
• share trading accounts;
• Annual General Meetings (AGM) notices;
• share registry notices from Computershare or Link Market Services; or
• similar documentation that may indicate ownership or purchases of shares.

The deceased’s accountant or financial advisor may also have some insight on whether the deceased held any shares.

Once discovered, the executor will need to contact a broker (for public company shares that are broker sponsored) the relevant share registry (for public company shares that are issuer sponsored) or the company (for private company shares) and notify them of the death of the shareholder.

From there, the executor can obtain details about the shares and dividends and the requirements to either transfer or sell the shares.

What happens to the shares when the shareholder dies?

In most cases, the Will of the deceased will be a good starting point to determine how a deceased person’s shares will be dealt with after all liabilities have been paid.

The way shares will be transferred to the beneficiaries, will depend on how the shares are sponsored. A shareholder can choose to register their legal title to shares on either the:

1. CHESS sub-register – managed by the ASX via a sponsoring broker (e.g. nabtrade or CommSec). If the shares are broker sponsored, a broker will need to be engaged to deal with the shares; or
2. Issuer Sponsored sub-register – maintained by the company who issued the shares. Most companies engage a share registry to administer the sub-register on their behalf (e.g. Computershare or Link Market Services). If the shares are issuer sponsored, a solicitor can be engaged to manage the transfer of shares.

The executor will need to complete the relevant share registry application forms and provide supporting documentation, including:

• death certificate;
• Will and grant of probate; or
• a grant of Letters of Administration (if the deceased’s died intestate (without a Will)); or
• a small estate release and indemnity (if applicable).

The transfer or sale of different types of shares and securities might entail different applications and requirements determined on a case-by-case basis (depending on the value of the shares and circumstances of the estate).

Before a transfer take place, the beneficiaries to inherit the shares from a deceased’s person’s estate, should seek advice from a financial planner or tax specialist to be aware of potential capital gains tax implications.

What happens if a sole director/shareholder of a private company dies?

In the case of a sole director/shareholder private company, under section 201F(2) of the Corporations Act 2001 (Cth) the deceased’s personal representative (executor) may appoint a person as the director of the company to continue business operations, unless otherwise specified in the company’s constitution. 

With a Will in place, the executor can appoint an interim director to run the business temporarily while waiting for a grant.

However, if someone dies intestate (without a Will), until someone applies and receives a grant of Letters of Administration, no one can continue the operation of the business. This delay in receiving a grant from the Court can often lead to complications for the business in the interim. Once received, the administrator can take steps to manage the transfer or sale of shares.

Therefore, in circumstances where someone is the sole director/shareholder of a company, it is crucial for them to have:

1. an Enduring Power of Attorney so that if they are incapacitated and unable to act as director of the company, their attorney may step into their shoes as a shareholder to appoint another director; and
2. a Will so that in the event of their death, the executor does not have to wait until a grant of Letters of Administration is made by the Court to step in as director.

When in doubt – seek advice

Administering an estate can sometimes be time-consuming and complicated for an executor. 

If there are shares included with the estate assets, an executor should seek help to know what’s required of them in their role and how to appropriately deal with them.

If you need assistance with the administration of someone’s estate, including the management of a deceased person’s shareholdings, please feel free to contact us.