FLK1 · Multiple-choice practice

FLK1 Business Law — Question 23

Question

DEF Ltd is a private limited company with multiple shareholders. Amy, a shareholder of DEF Ltd, passes away. Which of the following statements best describes the impact of Amy’s death on her shares in DEF Ltd?

Amy’s shares will be transferred to her next of kin automatically upon her death.
Amy’s shares will be transferred to DEF Ltd, and the company will cancel them.
Amy’s shares will be distributed according to her will or the laws of succession.
Amy’s shares will be offered for sale to the other existing shareholders at a discounted price.
Amy’s shares will be transferred to DEF Ltd and allocated to the remaining directors.

Answer and explanation

Correct answer: C. Amy’s shares will be distributed according to her will or the laws of succession.

When a shareholder of a private limited company passes away, their shares become part of their estate. The distribution of these shares will be determined either by the shareholder’s will or by the laws of intestacy if there is no valid will in place. The deceased shareholder’s next of kin or beneficiaries, as specified in the will or determined by the laws of succession, will inherit Amy’s shares in DEF Ltd. It is essential for shareholders to have a clear succession plan in place to address the transfer of their shares in the event of their passing. This can help avoid uncertainties and potential disputes over the ownership and control of the shares.

Original newsletter explanation ↗

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