An inter-option agreement is a contract between shareholders. In the event of the death of a shareholder, the contract may allow its representative to ask other shareholders to buy the deceased`s shares in the company. In addition, existing shareholders may be allowed to acquire the deceased`s shares, thus preventing the transfer of ownership to unknown third parties. The provision of transfers of eligible shares is a tax-efficient strategy that allows the shares of the deceased to be transferred to a small group of persons, such as family members or family trustees, without having to enforce the conditions of the right of pre-emption. Transfers of shares to family members or family trustees are “authorized transfers.” All other proposed share transfers are prohibited unless the shares were offered and denied first to existing members. This rule provides that any proposed transfer (including those resulting from the death of a shareholder) will first receive written authorization. This provision can be structured in different ways. For example, the agreement of a particular shareholder (perhaps a majority shareholder or founder of the company) could be sought; or the agreement of a majority, or indeed of all other shareholders, may be necessary. However, for large companies with large shareholders, everyone`s agreement can be unnecessary obstacles. It could allow a person with a very low turnout to effectively prohibit any transfer of shares.
When a shareholder dies, the right to his interest in the shares is transferred to the hereditary heir according to his will or inconsistency. The rights of the deceased shareholder are managed by his wills (if any) or by the administrator of the estate when the shareholder has died intestate. (Performers and administrators are collectively referred to as “personal representatives.”) The company must accept proof of the estate or administrative letters to justify the rights of personal representatives with respect to the shares: CA 2006 sec774. The rights of personal representatives to process shares are governed by the provisions of the company`s statutes. Almost all companies have either the model articles or the following provisions in Table A (the two below) requiring personal representatives to either execute a reassigned form, transfer the shares to the person concerned, or to request by letter the registration of the company as a shareholder.