The death of a shareholder – What legal consequences does this trigger for the other shareholders?
The death of a shareholder can pose a serious challenge for many GmbHs. The consequences can be wide-ranging, depending on whether the succession has been regulated in advance or not.
The absence of a will or of corresponding provisions in the shareholders’ agreement should be an urgent call to action for all stakeholders
Quite frequently, the shareholders’ agreement established for a GmbH fails to make any provision for the death of a shareholder. As a consequence, the heirs will inherit the shareholding. If there is more than one heir, they will inherit the shareholding jointly. This means that the heirs will only be able to exercise the rights associated with their shareholding collectively. Any official notices regarding the GmbH must be addressed to the entire community of heirs. And when it comes to voting on company matters, the heirs must always cast a joint vote on a consensus basis – which can prove difficult at times. The inheritance- tax effects for the heirs of a GmbH shareholding can also be significant, while the liquid funds needed to defray the tax bill are often unavailable. As a consequence, the heirs often prefer to sell their shareholding so as to be able to satisfy their inheritance tax liability with the proceeds.
Accordingly shareholders are well advised to plan ahead with regard to the possible death of a shareholder. This will involve making provision for the corresponding legal consequences, not only in the shareholders’ agreement but also at the personal level, i.e. in their respective last will and testament.