Solutions for Business - Case Study

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Surely this couldn’t happen...

Consider a typical scenario where there are two shareholders called Sven and Nancy. They spend all their time in their business, manufacturing footballs, and then all of a sudden Sven dies.

So what would happen?  

- Who will acquire the shares previously owned by Sven?
- Has he made a Will? Will the shares go to his widow or to his children or to someone else?
- Nancy could find herself in a very difficult position. Will she be able to carry on running the company as she wants?
- Who will exercise the voting rights in respect of those shares previously held by Sven?
- Even if the person inheriting the shares wants to sell them could Nancy afford to buy?

This is potentially a catastrophic situation for Nancy. But all this might be bad news for Sven’s family as well.

What if Nancy cannot afford to buy the shares or simply doesn’t want to? Where does that leave Sven’s family?

Sven’s salary will have stopped, of course, when he died. Will his family continue to receive an income stream by way of dividend payments? Maybe not – the directors will ultimately decide whether any dividends are paid. Sven’s family could be ‘locked in’ to a company with no real prospect of getting any income or other financial support just at a time when they would need it the most.

All these problems (whether for Nancy or Sven’s family) are entirely avoidable if Sven and Nancy had planned ahead and put in place the necessary structures to deal with these issues. It needn’t be complex and it needn’t be expensive. But having something in place is vital.