When it comes to drafting your will, often it is not as simple as Kate gets Mom’s jewellery and Bobby gets Dad’s car. People want to bequeath their membership in a closed corporation or partnership to an heir – the question is, is it possible?

Let’s break it down to simplify it.

Sole Proprietorship

In the case of a sole proprietorship, the entity will dissolve automatically upon the death of the sole proprietor.

Partnership

A partner cannot validly bequeath his/her interests in a partnership to a successor in terms of a will. Any assets or liabilities of the partnership will be divided amongst the partners in relation to their partnership interest, and the deceased’s partner’s interest will form part of the estate to be administered.

Closed Corporation

A member in a closed corporation (“CC”) is entitled to bequeath the membership to a successor in terms of his/her will. However, the nominated successor must qualify to be a member with the consent of the remaining members of the CC. Failure of qualification as a member, or if the nominated successor repudiates (does not want this membership), will result in the executor having to sell the membership interest to an existing member or an outside third party.

As an interesting side note, according to the Closed Corporations Act, a Trust may have membership in a CC, on the condition that none of the beneficiaries of the Trust are juristic persons, i.e. all the beneficiaries have to be natural persons.

Private Company

In the case of shares in a private company, it is not invalid to bequeath your shareholding to a successor; however, the success hereof will depend on the shareholder’s agreement of the said company. This is an agreement that the deceased would have entered into when the company was formed ad the agreement will determine what happens to the shares on the death of a shareholder. Therefore, it is imperative to ensure that the shareholders agreement allows for the bequeathing of shares in terms of a will.

In October, we have national wills week. Head over to Neumann Van Rooyen to ensure that your legacy is detailed the way you want it.