If the Estate of a deceased person includes business assets, it is likely that the Probate process will be involved. A Grant of Representation will always be required to deal with business assets after the owner has died.
The work required to sell or transfer business assets during Probate will depend on a number of factors, such as whether the business was owned solely by the deceased, whether it has employees, whether it is still operational and what property (if any) is owned by the business.
What if the Business is Still Operating?
If the business is still operating, but there is no one else to run it, it may be necessary for the person dealing with the Estate to become involved with the day to day running of the business. This could include dealing with debtors and creditors as well as the associated administration of dealing with any employees still on the payroll.
A decision will need to be made as to whether the business should cease trading or whether someone else is in a position to step in and continue running the business. There will be a significant amount of associated administration whichever route is chosen.
Business Partnership Assets
If the deceased was in a business partnership, they might own partnership assets in their own name. What happens to the deceased’s share in the business will depend on the terms of the partnership.
The partnership may be ruled by the statutory provisions of the Partnership Act or by an agreement between the partners, which will set out what should happen to a partner’s share on upon their death. Often the death of a partner will dissolve the partnership, and it may be possible for the surviving partners to purchase the deceased’s share of the business.
Limited Company Assets
The deceased may have shares in a limited company, such as an unlisted family business. Often a limited company’s ‘articles of association’ will restrict the transfer of shares (this is the document which outlines who controls the company and sets out what they can and can’t do). This restriction means that the deceased’s shares may only be able to be transferred to specific individuals.
When dealing with assets in a limited liability company, the Personal Representatives of the Estate will have to liaise with the company secretary regarding the valuation and transfer or sale of the deceased’s shareholding.
Valuing the Assets of the Business
Many companies will own certain assets which will also need to be dealt with, mainly if the deceased owned the business on their own. There may be stocks, equipment, machinery or vehicles to deal with, and a sole trader could own business premises in their sole name.
Often, business assets are shown at ‘book-value’ rather than correct date of death value, which can cause issues further down the line. Therefore, it may be necessary to instruct a Chartered Surveyor to value properties and expert accountants to audit the company accounts.
Selling or Transferring Business Assets
The next step is the sale or transfer of the business assets. This may be as simple as transferring ownership of business premises or shares. However, for more complex situations, it may be necessary to instruct a commercial property lawyer to assist with the sale or transfer of a business.