Inheriting Company Shares: Shareholder Register, Dividends and the Heir's Rights

A father or spouse dies and leaves shares in the family rice mill, shop or company. Heirs usually ask several things at once. Do the shares already belong to us? Why does the company's paperwork still show the deceased? Who can attend the meeting? Who is the dividend paid to this year? A very common question is whether inheriting the shares makes you the director in your father's place.

This guide covers only shares in a private limited company that pass by inheritance. For the overall picture of dividing an estate, see the main inheritance guide. The court steps for appointing an administrator are in the petition guide. General rights of minority shareholders are in the minority shareholder guide, and how to divide the roles of owner, director and employee in one family is in the family business guide.

The short answer

The law (Civil and Commercial Code). The estate consists of all the property of the deceased together with rights, duties and liabilities, except those strictly personal to the deceased (Section 1600), and the estate passes to the heirs when the deceased dies (Section 1599). Shares are therefore part of the estate. A private limited company must keep a register of shareholders recording names, shares and the dates a person became or ceased to be a shareholder (Section 1138). A transfer of registered shares cannot be set up against the company or third parties until the name and address of the transferee are entered in the register (Section 1129). Dividends can be declared only by a resolution of the general meeting and paid only out of profit (Section 1201), and directors are appointed or removed only by the general meeting (Section 1151).

Our practical view. Most problems are not about who owns the shares. They are the gap between the right and the paperwork. The heirs already hold the right, but the register has not changed, so the company does not know whom to send the meeting notice or the dividend to. The fastest route is to agree among the heirs who will hold how many shares (or have an estate administrator hold them temporarily), then give the company the documents in writing so it updates the register.

Hypothetical example. Khun Wichai in Khon Kaen dies holding 40% of the shares in a family rice-trading company. His heirs are Khun Bunruen, his wife, and their children Chanida and Theeraphong. Wichai's brother holds 60% and is the only director. He says he will "look after it for now" and has not updated the register. The three heirs already have the right to the 40%, but they must make the company aware of it with documents, otherwise they will receive no meeting notice and no dividend.

1. Who owns the shares, and who exercises the rights before the register is updated?

The shares pass to the heirs under the will or in the statutory order of heirs. With several heirs the shares stay together in the estate until they are divided. In the meantime, as a general description:

• If the court has appointed an estate administrator, or the will names one, the administrator manages the estate including the shares, with duties like those of an agent for the heirs, for example attending and voting for the estate under the court order or the will.
• If there is no administrator yet, the heirs own the estate together. Companies often do not act on the instruction of one heir alone and ask all the heirs to sign, or ask for a court order.
• The administrator must act for the benefit of all the heirs, not for himself or herself. A vote cast for personal advantage, or to shut out the other heirs, can lead to an objection or a request for removal.

The role of the administrator is covered in the petition guide. In practice each company asks for different documents, so ask the company in writing first.

2. The register of shareholders, BOJ.5 and shares that pass by succession

These two documents are different and are often confused.

Section 1129 provides that shares are transferable without the company's consent, except for registered shares in a share certificate where the articles provide otherwise. A transfer of registered shares must be in writing, signed by the transferor and transferee and witnessed by at least one person, otherwise it is void, and it cannot be set up against the company or third parties until the name and address of the transferee are entered in the register.

A caution about inheritance. Section 1129 is written for transfers between persons. We did not find a section in the private limited company chapter that deals specifically with shares changing hands because the shareholder dies. An heir therefore relies on the right under Section 1599, the company's articles, and the company's practice of asking heirs for documents. Some articles require shares to be offered, or consent obtained, before a transfer, so read the whole text to see whether it covers inheritance. Do not treat BOJ.5 as the only proof of who holds shares, because the register itself and the documents showing how the shares were acquired also matter.

3. What to prepare so the company updates the register

The set of documents a company usually asks for, adjusted to the case:

• A copy of the shareholder's death certificate and the ID cards of all heirs
• Proof of heirship, such as house registration, marriage certificate, birth certificates or the will
• The court order appointing an administrator with the certificate of finality, if one was appointed
• The heirs' agreement on who takes which shares, or the court order dividing the estate
• The share certificates (if any were issued) and a copy of the company's articles
• A written request to the directors to update the register; a sample is in section 7

Once the company has updated the register, ask for a copy of the corrected page, and check that the next BOJ.5 filed with the registrar shows the heirs.

4. Dividends: when and how heirs receive them

• Dividends are distributed in proportion to the amount paid up on each share, unless otherwise agreed for preference shares (Section 1200).
• A dividend can be declared only by a resolution of the general meeting. The directors may pay interim dividends from time to time when the company has sufficient profit. No dividend may be paid out of anything other than profit, none may be paid while there is a loss until the loss is made good, and payment must be completed within one month of the resolution (Section 1201).
• The company must send a letter of notice to every shareholder named in the register (Section 1204).
• Unpaid dividends carry no interest against the company (Section 1205).

In practice, a dividend declared before the shareholder's death is a claim of the estate. For one declared afterwards, the company pays whoever is entitled to the shares, but because the notice goes to the name in the register, a company that has not updated it often holds the money or asks for documents first. Heirs should not receive a dividend and split it privately without a record, because the money may need to go into the estate accounts and be counted when the estate is divided.

5. Do you become a director if you inherit the shares?

No. Holding shares and being a director are different things. Shareholders own the company, while directors manage it as the articles provide (Section 1144), and a director is appointed or removed only by the general meeting (Section 1151).

If the deceased was the only director, paying bills and continuing contracts is covered in the guide on the death of a sole director. Hypothetical example. In Wichai's case his brother is still a director, so no seat needs filling. But if the three heirs want Chanida to be a director, they must wait for a general meeting. The heirs' 40% cannot beat the brother's 60% if the articles use a simple majority, so negotiate before the meeting.

6. Table: right, who holds it before and after the register is updated, evidence

7. Sample letter to the company asking it to register the transfer

Adapt it to the facts. Send it by registered post and keep the acknowledgment.

Date ........................

Subject: Request to register a change of shareholder in the register of shareholders
         because of inheritance
To: The Directors, ........................ Company Limited
    (juristic person registration no. ........................)

Mr./Mrs. ........................, a shareholder of the company holding ........ shares
(share nos. ........), died on ........................ as shown in the attached copy
of the death certificate.

I write as [ ] an heir [ ] the estate administrator appointed by the court
........................ and ask the company to:

1. Record in the register of shareholders that this shareholder ceased to be a
   shareholder by death on ........................
2. Record the name and address of ........................ as shareholder in his/her
   place, for ........ shares, in accordance with the heirs' agreement / the
   attached court order.
3. Confirm in writing within ........ days and send a copy of the corrected page
   of the register.
4. In the meantime, send meeting notices and dividend notices to my address
   below, and hold any dividend on these shares until the register is updated.

Attached: 1) death certificate 2) proof of heirship / order appointing the
administrator 3) heirs' agreement / consents 4) ID card of the requester
5) share certificates (if any)

Signed ........................ Address / phone / email ........................

8. Family-business disputes: shareholders' agreements and pre-emption

Family shares often carry rules beyond the statute, which an heir must know before deciding to sell or divide.

• The company's articles may restrict transfer of registered shares in a share certificate under Section 1129. Check the latest registered version.
• A shareholders' agreement may give existing shareholders a right of first refusal (pre-emption) when someone wants to sell, or fix the price and valuation method when a shareholder dies. It binds only the parties, and you must check whether it covers passing by death.
• Meetings and information. If the company does not send meeting notices or will not let you inspect the register, use the tools in the minority shareholder guide.
• A 50/50 split. If inheritance leaves the heirs and the existing shareholder with equal holdings, see shareholder deadlock.
• Keeping salary, dividends and position apart. An heir who already works in the company should separate rights as a shareholder from pay as an employee. See the family business guide.

What each agreement does depends on its actual wording and the facts, so we should not conclude from the title of a document alone. If the company refuses without reason, or the heirs and the existing shareholder cannot agree, the last resort is the court, and the outcome depends on the evidence and the court's discretion. We cannot promise a result in advance.

9. Checklist for heirs who receive shares

Gather information

• Ask for a copy of the register of shareholders, the articles and the latest company certificate
• Check that the deceased's number of shares matches the register and the latest BOJ.5
• Find the share certificates and any shareholders' agreement the deceased signed
• Check whether the deceased was also a director or authorised signatory

Agree within the family

• Decide whether to appoint an estate administrator, and who
• Decide whether to hold the shares together or divide them among the heirs
• Agree who will attend and vote, and record it in writing

Notify the company

• Send the request to update the register with attachments; keep the acknowledgment
• Ask for a copy of the corrected register page
• Check the next BOJ.5 and any director registration (if there is a change)

Dividends and records

• Keep dividends received in a separate account until the estate is divided
• Keep every general meeting resolution and receipt

Further reading

• How to divide an estate when a parent dies — order of heirs and the overall estate process
• Filing the court petition for an estate administrator — documents and court steps before a company will accept an administrator
• Minority shareholder rights in Thai companies — meetings, information and challenging resolutions
• Family business: roles, pay and decision rules — separating owner, director and employee
• Death of a sole director — when the company has no director left
• 50/50 shareholder deadlock — when the votes are equal

Heirs have the right to the shares from the date the shareholder dies, but can use it fully against the company only when the register and the documents catch up, and holding shares does not bring the director's seat with it.

We help heirs assemble the papers to inherit shares, write to the company, and act when a dispute arises. For an initial consultation, call +66 92 254 2045 or send us the details. See also our estate practice and corporate secretarial service.

This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.