I have a situation whereby a testator has an interest in a Limited Company (Director and shareholder) and has set up a Shareholder’s Agreement and Cross Option Agreement which would enable one of the other shareholders in the Company to purchase the testator’s share (there are 4 shareholders in total, one being the testator) within a period of 2 years following the testator’s death. If such option is not exercised then it will lapse. How do others draft a Will in this situation? Do you have any specific clauses that need to be included. I cannot find anything on PLC with regard to specific clauses nor in the books that I have.
I don’t see why you would need any special provisions as the two agreements you mention would be binding on the executors. They would not have to do anything other than sell as required, which would be covered by the usual/statutory powers.
You may want to ensure that they have a reasonable indemnity that would cover them if there is to be any negotiation on values.
The only implication I can think of is that (depending on the terms and others’ intentions) the executors may be stuck with the shares for two years, until the option lapses.
Yes it relates to the shareholding (not the Ltd assets) "my holding of shares in (Ltd Company)* . . ", typically a “business property relief trust” - which is a DT - includes the wording “shall hold all my 100% qualifying business property” or words to that effect.
Thanks Richard. I just want to check that my interpretation of everything is correct.
Essentially, if the shares in the LTD company are left in the BPR DT (provided they qualify for BPR at the time) and the spouse does not need to inherit this for example, the Trustees could pass the assets to the children tax-free if the proceeds of the sale of the shares were appointed out to them within two years? Is this correct?
If the children are under 18, would it be better to appoint the proceeds out to the spouse instead or how would that work in those circumstances?
If the shares do not in fact qualify for BPR then these can be appointed out to the spouse and qualify for spousal exemption but I understand that this needs to be done within two years from the date of death. What happens if assets are appointed out to spouse after two years or appointed out to children after two years? Assume these would attract the usual inheritance tax implications such as ten yearly charges and exit charges.
Finally, would two trustees be required for the BPR DT? At the moment, they would just want to appoint the other of them as the sole executor / trustee within two substitute executors.
Please do let me know if my interpretation is incorrect on any of the points. I am grateful for your insight.