Taking Charge of Estate Assets
In Monday's blog, I noted the increasing prevalence of new on-line businesses serving to assist estate trustees with the location of estate assets. Of course, locating the asset is just the first step. The estate trustee has to then manage the asset. In most instances this involves liquidating the asset or distributing it in specie to the beneficiaries depending on the testator's intention.
Shares held by a deceased in a private company present a particular challenge to an estate trustee. Should they be sold or should the estate trustee participate in the business as a going concern?. This quandry, if the will gives no guidance, is compounded when the deceased holds the majority of shares and leaves a controlling interest in such a corporation.
While not always a simple question to answer, in such circumstances it seems self-evident (and just makes good business sense) for the estate trustee to be a director of the company. In such capacity, the executor is positioned to watch over the management of the business and protect this asset of the estate. The issue was addressed in an oft-quoted excerpt from Lucking’s Will Trusts (Re) (1967) All E.R. 726, where the Court states:
“Now what steps, if any, does a reasonably prudent man who finds himself a majority shareholder in a private company take with regard to the management of the company’s affairs? He does not, I think, content himself with such information as to the management of the company’s affairs as he is entitled to as a shareholder, but ensures that he is represented on the board.”
Have a great day,
David
