DISPUTES OVER FAMILY BUSINESSES AFTER DEATH: CAN YOU MAKE A CLAIM?
Losing a loved one is always difficult, but things can get even more complicated when a business forms part of the estate.
A family business inheritance dispute is often about more than money. The people involved may be relatives, business partners, and employees at the same time. That can make disputes over control, shares, company information, and the estate harder to resolve.
Are business shares part of the estate?
If the person who died owned shares in their own name, those shares will usually form part of their estate. That means the executor or administrator needs to find out what the shares are, what rights they carry, and what they are worth.
A business interest may also involve other things, such as:
- a partnership interest
- director loans or money owed by the business
- property or assets owned personally rather than by the company
- dividends or other payments due to the person who died
A will can say who should benefit from the estate, but it does not always decide exactly what happens to business shares. In a private company, the company’s articles or a shareholder agreement may set rules about whether shares can be transferred, who can buy them, and how they should be valued.
That is why the first step is usually to check the paperwork. This may include the company’s articles, shareholder agreements, the share register, Companies House records, accounts and any partnership agreement.
When the estate and shareholders disagree
Arguments often start when the people still running the business and the estate want different things.
The remaining shareholders may want to keep the business moving and deal with the shares quickly. The estate may need more information before it can agree to anything, especially if the shares are valuable or the business has not been open about its finances.
This can lead to disputes about who can vote with the shares, who can see company records, whether the estate is being offered a fair price, or whether the other shareholders are trying to take control at an undervalue.
The business can keep trading, but the estate still needs enough information to protect the beneficiaries. If shares are sold, transferred or valued without proper records, beneficiaries may later question whether the estate has lost out.
Why business assets can make probate more complicated for executors
Under Section 25 of the Administration of Estates Act 1925, executors and administrators are responsible for identifying the estate’s assets, protecting them and dealing with them properly.
Business assets can make probate more complex than a standard estate. The executor may need to deal with company accounts, shareholder agreements, director responsibilities or voting rights, even if they have no business experience.
This can become harder if the executor is also involved in the business. They may have to make decisions while managing their own role as a shareholder, director, employee or family member.
Where family relationships are already strained, those overlapping roles can make it harder to separate what is best for the estate from what is best for the business or individual family members.
Valuing a family business
A reliable valuation should look beyond a headline figure. It should take account of the accounts, assets, debts, loans, profits, company rules and the size of the shareholding. It also matters whether the person who died owned a majority share, a minority share, or an interest in a partnership.
This is often where families fall out. One side might say the shares are worth very little. The estate might suspect they are worth much more. A low figure is especially concerning if it comes from someone who wants to buy the shares or gain more control of the business.
Warning signs can include:
- a valuation with no clear explanation
- pressure to accept a quick buyout
- accounts or records being withheld
- money being moved out of the business
- the estate being told it has no real say
The key point is not always the total value of the business. It is the value of the person’s share and whether the estate is being offered a fair deal.
Court solutions in business inheritance disputes
In a will dispute, the court will not usually step in just because relatives disagree about the future of a family business. The focus is whether the will, the estate or the deceased person’s business interest has been dealt with lawfully and fairly.
Court action may be possible where the estate has been affected in a specific way. For example, there may be a claim if information is being withheld, shares have been transferred wrongly, the estate’s interest has been undervalued, or someone has used their role in the business to reduce what the estate should receive.
Depending on the facts, the court may be asked to deal with a particular problem, such as:
- ordering disclosure of records
- checking whether a share transfer was valid
- dealing with an unfair valuation
- recovering money or value owed to the estate
- resolving a dispute about how the executor has dealt with the business interest
The focus is usually on whether the estate has been properly protected, not whether every business decision was right.
How Will Claim can help with family business estate disputes
Will Claim can provide legal advice on the circumstances of your dispute and explain whether there may be grounds for a claim. We can help you understand the evidence available, the issues that may need investigating, and the options open to you.
Request a free claim assessment from Will Claim now to find out your best next steps.
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This blog provides general information only and should not be treated as formal legal advice.