Estate Planning for A Deceased, Special Conditions or Missing of a Shareholder

1. How to manage the Company Shares for the Deceased Shareholder, Unfit, Bankruptcy & Merger and Acquisition.

a. When a shareholder deceased and it can be distributed through 3 methods:

Method 1: Grant of Probate (GOP) when the shareholder is having a will.

Method 2: Letters of Administration (LA) when the shareholder is NOT having a will.

Method 3: Distribution Order from Land Administrator if the shareholder is NOT having a will and value of the estate is not more than RM 2 million.

2. What are the steps if the deceased shareholder with A will?

Step 1: All assets will be frozen upon the deceased of the shareholder.

Step 2: Unlock it through a Will by Executor.

Step 3: The executor will execute the will through High Court and get a probate (3-6 months) and unlock the assets.

Step 4: Executor has to ensure all estate taxes and taxes are cleared when delivered to next-of-kin in 18-33 months from the day of the deceased shareholder.

Step 5: The executor will notify to CoSec on the shares transfer with referring to S 109, Companies Act 2016 and the update of shares transfer must be conclude in in longer than 60 days from the day of notification.

Remarks: If the beneficiaries are below the age of 18, the executor will be acting as trustee and dividends receive from company will be distribute to the under-age through trustee. 

3. What are the steps if the deceased shareholder WITHOUT a will?

Step 1: All assets will be frozen upon the deceased of the shareholder.

Step 2: It can be unlock through identification of heirs (primarily in favor of the spouse (i.e., the legal spouse), issue (i.e., the children and the descendants of deceased children), and parents.)

Step 3: All heirs are to agreed on the estate inclusive of shareholding and announce to the Administrator (the arguments normally begin at this stage due to conflict of interest).

Step 4: Appointment with 2 sureties with Administrator Bond as they will need to guarantee on the entire estate value of the deceased (Distribution Act 1958 ).

Step 5: Application will be made at High Court and upon successful, a Letter of Administration (LA) will be produced.

Step 6: Distribution Order will be distribute according to the list of heirs.

4. What are the steps if the shareholder is Missing in Action (MIA) or remain unknown?

a. The financial instruments belonging to the shareholder aka the public will be transferred to the Government via the name of Minister of Finance and Accountant General with the sole purpose in returning to the owners or heirs in the near future.

b. The exercise of reasonable diligence of a Company in unable to discover the whereabouts of a shareholders for a period in not less than 10 years (CA 2016: S 583 (1).

c. The Company may transfer to the Government as Trustee with the responsibility of disposing of any shares that the Minister thinks reasonable in subsequently, all proceeds will be accrued in the records of the missing shareholder before lodging with the Registrar of Unclaimed Money (subject to Unclaimed Money Act 1965). The lodged money can be claim by the immediate heirs with no limitation of the period of time https://www.anm.gov.my/en/public/unclaimed-money.

d. For the entire process, the Directors may trigger to the respective COSEC for the proceedings of shares transfer if the shareholder is remain unknown for a period of not less than 10 years.

Remarks:

1. The scenarios of estate distribution: 

a. Scenario 1: If the deceased shareholder is not survive by the immediate heirs, the estate will be distributed according to:

First level: On trust for brothers and sisters of the intestate in equal shares; then,

Second level: For the grandparents of the intestate in equal shares; then,

Thirdly: On trust for uncles and aunts of the intestate in equal shares; then,

Fourthly: For the great grandparents of the intestate in equal shares; then,

Fifthly: on trust for great grand uncles and great grand aunts of the intestate in equal shares.

b. Scenario 2: It is complicated. Just write a Will:  https://www.gafsadvisory.com/

2. The scenarios of a  shares transfer (Section 105) :

Scenario 1: Deceased of a shareholder

a. Deceased shareholder- estate under administration (S 105 from shareholder to Executor) – Executor/ CoSec doing S 105 to beneficiary.

Scenario 2: Unfit (Mental Health Act 2001) to become a shareholder

a. Unfit shareholder– Court order issued under Committee of Estate ( S 105 from shareholder to Committee of the estate) – Committee doing S 105 back to Beneficiary’s Name.

Scenario 3: Bankruptcy of a shareholder (Bankruptcy Act 1967 Act 360 – Reprint 2017 )

a. Director General of Insolvency (DGI) takes control of the shares (Section 55 (2) as he is the receiver and reserve the right to S 105 to the same extent Section 55 (3) as the bankrupt shareholder.

Scenario 4: Merger and Acquisition of a member

a. Shareholder under M&A- Restructuring process- Shareholder under M&A doing S 105 to the Successor through a Private Merger Agreement.

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