Can I give away the shares of a private company (limited by shares) when I die?
The information in this article applies specifically to private companies. For details on sole proprietorships, please refer to our related article.
Unlike a private company, which has perpetual succession and continues to exist even after the owner's passing, a sole proprietorship is not a separate legal entity and ceases to exist once the owner dies. As a result, all business assets and liabilities become part of the owner's personal estate.
This would largely depend on the company's constitution and if there are any special buy-sell / shareholders / founders agreement etc. The agreements might bound the owner's shares to certain conditions such as making them non-transferrable. The company's corporate secretary should have this information.
For example, there may be pre-emption rights (where existing shareholders have first refusal to buy the shares), lock-in periods (where transfer of shares are restricted), forfeiture clauses (where share are forfeited or bought back by the company upon certain conditions), regulatory approval requirements in certain regulated industries, etc. Separately, employee stock options only becomes shares after the options are exercised, and usually come with restrictions and vesting conditions.
Any such restrictions in place can prevent or limit the transfer of shares through inheritance and may also apply if the beneficiary later decides to sell or transfer those shares.
Assuming the company adopts the "default" model constitution in Singapore, and there are no other contracts or restrictions in place, then yes, the shares can generally be transferred according to your Will.
Note on unpaid shares: If your shares are not fully paid, your estate or the person inheriting those shares could be liable to pay the unpaid portion when the company makes a call for payment of those shares. Planning wise, it is important to check and confirm with your company secretary that your shares are indeed fully paid and correctly marked as fully paid.
That being said, business legacy wise it may not be feasible. The people whom you care about may not necessarily be the best person to run the company, or even interested in continuing to run the business in the first place.
Coming from the perspective of a company ourselves (getArrange.com), we have seen cases where a company goes bust when the founder passes on. We can understand you have worked really hard for your loved ones, and they should be getting something out of it for your hardwork. Looking long-term, a company as a whole might want to consider other financial instruments to ensure an optimum outcome for both your loved ones AND the company.