What is probate?
When a business owner dies, there is a legal process called probate which has to be undergone to ensure any business assets are sold or transferred. This can become more complicated if the business has more than one owner, has employees, is currently in operation or owns commercial property.
The business assets that belonged to the deceased are placed into trust for the beneficiaries of the estate until probate is granted.
Probate and business assets
During probate, business assets need to be assessed and valued, which can be difficult if the business is still running its normal day to day activity and responsible for employees. The process may vary if there are business partners that also hold shares, as the outcome of what happens to the deceased’s shares will depend on the specifics of the individual partnership terms.
There may be agreements or Will clauses in place already which outline the process in the event of the death of one of the business owners, which can help speed the process up, but if there are other circumstances involved, this can complicate matters too.
Valuing business assets can be tricky, as the ‘on paper’ value may not always be accurate. It can often be necessary to instruct experts, such as a chartered surveyor, to value any commercial property owned by the business, and accountants to run a full audit on the business accounts.
Once the value issue is settled, there may still be complexities around the sale or transfer of business assets, which is where the assistance of a specialist solicitor can make a real difference.
What happens to a business in probate?
In a partnership situation, where there is more than one owner, it can often be the case that the business continues their usual activity during the probate process. However, if the deceased was the sole owner of the company, a decision will need to be made, usually by the executor(s) of the Will, whether to cease trading or carry on as normal for the time being.
With issues around probate and business owners rarely being straightforward to resolve, this can be a lengthy process, which can leave employees or business partners feeling ‘in limbo’ for many months or even years.
What do you do with a business when someone dies?
If the deceased has prepared for the eventuality of their death in relation to the business in their Will and any relevant partnership agreements, then dealing with business assets can be fairly straightforward. However, the probate process for non-business owners can often take at least 6-12 months, so when a business is involved, this can be extended significantly.
It may be possible for business partners to ‘buy out’ the deceased’s shares in the company, or in some cases their shares may pass to a family member, who may choose to sell or transfer ownership, or may not.
How do you transfer ownership of a company after death?
There may already be business documentation about how company shares should be dealt with after the owner passes away in the shareholder agreement. Sometimes the other existing shareholders will have first refusal on buying the shares or there may be certain individuals prevented from purchasing them. There may also be an agreement that the beneficiaries of the deceased can buy out the other shareholders.
Transferring ownership itself involves a legal process, where details such as the value of the assets will be taken into account, along with any preferences specified by the deceased or restrictions placed upon the potential buyer(s).
Why choose us as your probate lawyers?
We can offer specialist legal advice to business partners or the loved ones of the deceased, ensuring that you are kept fully informed about the status of business probate and what to expect next, meaning that you always have access to the expertise you need to help the process go as smoothly as possible.
Get in touch to find out more about probate services for businesses by calling 0161 696 6238.
The advice provided to non-face to face clients will be through electronic or written communication only e.g. by telephone and email. Stephensons Solicitors LLP assumes no responsibility for, and shall not be liable for, (a) verification of mental capacity or testamentary capacity (b) verification of any undue influence or duress involved (c) the execution of any documents.