Companies without shareholder agreements: A ticking time bomb for estate planning

Without a clear shareholder agreement, estate planning can become a minefield. The transfer of ownership may be uncertain, leading to potential disputes and delaying the distribution of assets to beneficiaries.

Here’s what can go wrong without a shareholder agreement:

• Ownership disputes: Beneficiaries may contest who should inherit the shares, causing family and business conflicts.

• Delays in asset distribution: Without a clear transfer mechanism, the process of passing on shares can be delayed, affecting beneficiaries.

• Valuation disagreements: Determining the value of shares becomes contentious, complicating the fair execution of the estate plan.

• Business disruption: A lack of clear processes can destabilise the company, impacting its future operations.

• Legal battles: Disagreements between shareholders and beneficiaries may lead to costly and time-consuming legal disputes.

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Comprehensive shareholder agreements provide clarity on ownership rights, transfer processes, and dispute resolution, helping to mitigate these risks.

Encourage your clients to consult legal and financial advisors to ensure their estate planning aligns with the company’s objectives and avoids these pitfalls. Help them protect their business legacy.

Note: Always consult with a lawyer before making any changes to entities or estate plan to ensure compliance with legal requirements and protect your client’s best interests.

Inherit Australia provides advisers with a structured estate planning facilitation process to ensure that client interests and wishes are maintained as part of their estate plan.