Peculiarities of inheritance of corporate rights of LLC: securities, property and debts

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Understanding the intricacies of inheriting corporate rights is a crucial aspect of legal practice. Generally, an heir's inheritance includes a variety of rights and responsibilities that the deceased had, which are passed on to the beneficiaries. This includes corporate rights, which involve ownership and managerial powers within corporate structures.

The issue of inheriting corporate rights becomes particularly relevant in the case of Limited Liability Companies (LLCs), where decisions about changes in ownership and management structures can significantly influence the future of the business. It's important to note that inheriting corporate rights can also encompass securities, which can complicate the inheritance process since securities are subject to specific provisions under civil law.

In this article, we explore the key aspects of inheriting corporate rights and securities in Ukraine. We will address crucial questions such as:

  • What should be considered when inheriting a business?
  • What is the process for inheriting corporate rights in an LLC?
  • Can a foreign national inherit a business in Ukraine?
  • Are heirs entitled to receive dividends and other payments related to corporate rights?

For those needing assistance with formalizing corporate rights in inheritance situations, our legal team is prepared to offer support.

With experience in managing various types of property, we are adept at resolving document discrepancies and preparing properties for transfer. We also offer guidance on how to potentially avoid unwanted inheritance, as sometimes inheritances can include not only property rights but also liabilities like debts, loans, or other financial obligations. Our commitment is to provide a professional approach and achieve the best possible outcome for you.

You may also like: Steps to Take if the Sole Founder and Director of an LLC Passes Away: How to Handle the Company's Documentation?

Corporate Rights and Securities as Part of an Inheritance

When inheriting securities or corporate rights, it's crucial to keep the following in mind:

  1. Firstly, identifying these securities or corporate rights can be accomplished either through a notary's investigations and access to various registries, or independently, or through representatives appointed by power of attorney, such as our legal experts.
  2. Secondly, consider any specific legal nuances related to the inheritance item. For example, in a case involving one of our clients inheriting a stake in an LLC, we had to meticulously examine the provisions of the Ukrainian "Law on Limited and Additional Liability Companies." This law outlines the specific processes for an heir to join the company when inheriting a share of less than or more than 50%.

In some cases, after receiving an inherited business, you may not even be aware of the existence of assets, securities, or funds in a bank account, as such information isn’t publicly available. Therefore, if you wish to obtain information when inheriting corporate rights, it's necessary to send appropriate inquiries to banks, depositories, investment funds, or other relevant institutions.

Remember, along with property and rights, obligations are also inherited. This means that if you inquire with a bank about the amount in an account while inheriting corporate rights, you might discover that the decedent only left behind a loan. The obligation to repay this loan would then be transferred to you. Therefore, sometimes it's better to renounce an inheritance if the costs outweigh the benefits.

You may also like: How to Handle an Inheritance that Includes Debts?

Inheriting Corporate Rights: The Procedure of Inheritance

When inheriting a business, the process of inheriting corporate rights is divided into two stages:

1. Acceptance of the Inheritance: This is the stage where the heirs accept the inheritance, and the estate for inheritance is established. At this stage, our lawyers assist in identifying, verifying, and forming the inheritance estate, determining the order of inheritance and the number of heirs involved.

2. Implementation of the Inheritance: This stage involves the actual realization of the inheritance, that is, the re-registration of rights to the heir or heirs. Following the acceptance of the inheritance, there is a re-registration of properties to the heirs.

You may also like: Changes in LLC Membership Due to Inheritance of Shares in Authorized Capital

Inheritance of Corporate Rights by a Foreigner in Ukraine: A Successful Case

We recently handled a fascinating inheritance case. A female client, a foreign national, approached us for assistance following the death of her father in Ukraine. She was aware of the real estate left by her father, as indicated in his will. The task was to locate all the assets her father had left.

During our investigation, we discovered that the deceased held shares in the authorized capital of several companies, which we reported to the client. She now plans to inherit her father's shares in these companies and continue his business, receiving exhaustive consultation from us on managing a business as a non-resident in Ukraine.

It's important to note that specific legislative norms are established for foreigners inheriting in Ukraine. You can find more detailed information on this in our material: Inheritance in Ukraine. Legal Consultations.

Inheriting Corporate Rights: Payments and Dividends

When inheriting corporate rights or securities that generate dividends, heirs are entitled to these payments. According to current legislation, heirs inherit all the rights and obligations of the decedent as of their time of death. Therefore, if the decedent was entitled to dividends, these are inherited by the heirs.

This process can sometimes be complex. When talking about inheriting the stocks of a minority shareholder, or if the heir owns shares or investment certificates of joint investment institutions (investment, venture mutual, or corporate funds), a more detailed property search is necessary since such information might not be available in public registries.

Additionally, there can be technical issues with dividend payments in the case of inheritance. If dividends were paid into the decedent's account, heirs may face the challenge of inheriting these already disbursed funds. If the company has been informed of the shareholder’s death, resolving inheritance issues regarding these payments is necessary. If the payments have not yet been made, delaying them until the inheritance process is completed and re-registered might be necessary.

In any case, dealing with inheriting corporate rights, securities, or dividends is best managed with legal assistance. Our specialists can help:

  • Analyze the situation and plan the necessary steps.
  • Conduct searches through open resources and notary requests to find non-public information.
  • Identify the full scope of the inheritable estate.
  • Assist with the re-registration of the inheritance.
  • Represent your interests before notaries, other heirs, third parties, etc.

Our team ensures a high level of professionalism and a tailored approach to resolving all related issues.

Learn more about our inheritance services and their costs here.

Publication date: 29/12/2023

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