Estate planning · Succession
Business succession: shares, partnership, and buyout clauses
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Facts
A business owner's death without a succession plan is a catastrophic event for the business. For a Pvt Ltd company: shares can be bequeathed by Will. But co-founders/shareholders may have ROFR (Right of First Refusal), they must be offered the shares before the heir can sell.
Provisions and law
- Companies Act 2013, Sec 72 | Partnership Act 1932, Sec 42
Analysis
For a partnership: death automatically dissolves the partnership under Sec 42 of Partnership Act unless the agreement specifies continuation. Fix this with a Buy-Sell Agreement (also called Shotgun Clause), triggers on death, disability, or exit.
Conclusion
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