On sale of shares from heirs to third parties
A deceased father left behind are 30% shares in a company. The children (heirs) of the deceased wish to sell the shares eventually. How should they go about it?
Transfer shares to heirs
First, it will first be necessary to have the shares transferred into the names of the heirs.
This can only be done if there is already an inheritance certificate or court determination of inheritance. For more information on inheritance certificate, please see this page.
With the inheritance certificate, the heirs can then have a Deed of Rights Transfer executed.
Article 56 paragraph (1) of the Company Law:
“The transfer of rights to shares is done by a deed of transfer of rights.”
Article 57 paragraph (2) Company Law provides that transfer of shares arising from inheritance does not require the approval of the Company’s organs (GMS, Commissioners or Board of Directors). Nor is it necessary for the heirs to offer the shares to other shareholders.
Following the execution of the Deed of Rights Transfer, the same should be reported to the Company for recordation of heirs in the shareholder register or a special register which includes the recording of the rights to the shares, the date and day of the transfer of the shares.
The Board of Directors has the obligation to carry this recordation.
Following the recordation, board of directors is obliged to notify the Ministry of Law and Human Rights (Kemenkumham) of the new shareholder composition. Article 50 paragraph (1) and paragraph (2) requires this to be done by the Company within 30 (thirty) days from the date of registration of the transfer of rights.
How to Sell Shares Owned by Beneficiaries to third parties
Following the completion of the above process, the heirs can now sell these shares to third parties.
However, there could be restriction in the articles of association of the company such as the obligation to first offer the opportunity to existing shareholders.
Article 58 of the Company Law: In the event that the articles of association require the selling shareholder to first offer its shares to shareholders of a certain classification or to other shareholders, and within a period of 30 (thirty) days from the date of the offering it turns out that the shareholder did not purchase, the selling shareholder may offer and sell their shares to third parties.
Every selling shareholder who is required to offer his shares as referred to in paragraph (1) has the right to withdraw the offer after the 30 (thirty) days period as referred to in paragraph (1) has passed.
In order to sell shares belonging to the heirs, it is necessary to give due regard to the Articles of Association of the company, whether it contains restrictions on sale of shares.
Firstly, whether there is an obligation on the part of the shareholder who wants to sell the share to first make an offer to the existing holder of a certain shareholder classes or to other shareholders.
If there are such restrictions, they will have to be complied with.
Also it is necessary to check if approval of the Board and/or Commoner are required. Article 59 of the Company Law: Approval approval of the transfer of rights to shares that require the approval of the Company’s organs or its refusal must be given in writing within a maximum period of 90 (ninety) days from the date the Company’s Organ receives the request for approval of the transfer of rights. In the event that the said 90 days period has passed and the Company Organ does not provide any written statement, approval is deemed to have been given to the transfer of rights to the shares.
The final two steps are to have the Deed of Rights Transfer signed and then notify the Ministry of Law and Human Rights in accordance with Article 56 of Company Law.