Upon the death of a business owner, there are many procedures and processes to be taken care of to ensure successful transfer and business continuity, while minimizing disruption. However, when it comes to ownership of foreign companies, improper succession planning might prolong and even complicate the process.
For shareholders of foreign companies located in the British Virgin Islands, Belize, Bahamas, Nevis, Panama or Canada, there are different methods and mechanisms that can be used in order to simplify the process of transferring shares upon the death of a shareholder and ensure that ownership and control of the company can pass quickly and efficiently.
On the death of an individual shareholder, the shares of the foreign companies need to be transferred to the intended recipients; however, for these jurisdictions, shares of these companies are deemed to be situated abroad. Therefore, interest in a foreign company cannot be validly transmitted to the intended heirs unless proper planning has been done using any of the following options.
Planning Options Available
1. Joint Shareholders
Company shares can be held by more than one person as joint tenants with rights of survivorship. On death, the deceased’s interest in the shares will pass automatically to the surviving shareholder (Joint Tenant) without any requirement to obtain probate.
Registering a Will in place with the foreign jurisdiction where the company is located will significantly simplify the process of obtaining probate in that jurisdiction. It will also reduce the time required to obtain the grant letter (legal authorization to transfer), as a foreign process can run concurrently with any application for probate or its equivalent in the deceased’s home country.
It should be noted that even though having a Will in place with the foreign jurisdiction simplifies and speeds up the process of legally transferring shares, this transfer may be overridden by any conflicting “forced heirship” rules that may apply under the laws of the deceased’s home country.
3. Foreign Trusts
Trusts are established for asset protection and succession planning purposes. In this context, the primary benefit of holding shares in foreign companies trusts, include:
- Probate is not required in respect of shares settled in a foreign company trust on the death of the settlor (i.e. the person who contributes the shares into the trust).
- Assets held in a properly constituted trust are not subject to any right, claim or interest conferred by a foreign law upon any person by reason of personal relationship to the settlor or by way of heirship rights.
- Shares held in foreign trusts are protected from the forced heirship claims which otherwise may arise upon on the death of a shareholder if the shares had been personally owned by him/her.
For more information, or if you would like to explore the options available to simplify the succession process of your foreign company, please contact us.