When a person who owns shares in a Bermuda company dies, the person's shares must be transferred into the name of his or her beneficiary. This is true whether the shares are in a local company, or in an exempted company.
The requirements for making such a transfer are normally set out in the constitutional documents of the company, which provide guidance to the company's board of directors about what they must do in order to facilitate such a transfer.
For example, a company's by-laws sometimes provide that: "On the death of a shareholder, the 'estate representative', shall be the only person recognised by the company as having any title to the deceased's shares." In such cases, the estate representative is the only person who may sign the share transfer form on behalf of the deceased shareholder in order to record the details of the new shareholder in place of the deceased.
The 'estate representative' is typically defined in the by-laws of a company as "the person to whom probate or letters of administration has or have been granted in Bermuda or, failing any such person, such other person as the board may in its absolute discretion determine to be the person recognised by the company".
The authority of an 'estate representative' is further supported by Bermuda's Companies Act 1981, which provides that "a transfer of the share or other interest of a deceased member of a company made by his estate representative shall, although the estate representative is not himself a member of the company, be as valid as if he had been such a member at the time of the execution of the instrument of transfer".
In connection with the above provisions, the directors of a company may consider the 'estate representative' as having the authority to advise them on who should be registered as the new shareholder in place of the deceased.
In situations where the shares are held jointly with another individual, then the by-laws will generally provide that the shares will then be held in the name of the surviving shareholder. In such cases, the board of directors will request a copy of the deceased's death certificate, for the company's records.
The nature of the documentation required by a company's board of directors in order to make a transfer of a deceased's person shares is entirely in the hands of the directors.
The directors may decide that a Bermuda Grant of Probate (where there is a will) or a Bermuda Grant of Letters of Administration (where there is no will) is required in order to register the shares in the name of the person entitled to the shares (or his nominee). They may also decide upon some other form of documentation.
In the case of a Bermuda Grant of Probate, the normal application process to the Bermuda Supreme Court would apply.
In some cases, the board of directors may accept a Bermuda Resealed Foreign Grant where the original Grant was issued by a court in either of the United Kingdom or any other British possession, colony or dependency; a member nation of the Commonwealth; or the District of Columbia or any state of the United States of America.
If a Foreign Grant does not qualify for a reseal in Bermuda, then the deceased's foreign governed Will can be proved in the usual manner to the Bermuda Supreme Court.
The directors of a company may also accept a Foreign Grant of Probate/Letters of Administration where the deceased's entire estate (including his shareholding in the Bermuda company) was probated in another jurisdiction and the only assets in Bermuda are the shares in the Bermuda company.
A Bermuda/Foreign Grant is generally requested by the board of directors in order to protect them from any claims that the 'estate representative' did not have the authority to validly transfer the shares, or the recipient of the shares is not the correct beneficiary of the shares.
However, a Bermuda/Foreign Grant is not required by law as most company by-laws authorise the board of directors to decide in their absolute discretion, what documentation is required in order to enable them to approve the share transfer.
Where the directors of a company accept documentation other than a Bermuda/Foreign Grant, they would normally ask the transferee (the person claiming to have the authority to sign the share transfer form on behalf of the deceased) of the shares to give the directors of the company an indemnity to protect them from any subsequent claims regarding the shares.
It is important to note that until the recipient of the shares is registered as the new shareholder, he cannot give a discharge for any dividends or other monies payable in respect of the shares — or be entitled to receive notices of, attend, or vote, at general meetings of the company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.