Inheritance of a business share

What it means

Inheritance of a business share is the passing of an ownership interest in a limited liability company to the heirs when a member dies. The Commercial Code generally allows it: the interest is an asset like any other, and the heir becomes a member with all the rights and duties.

The articles of association may, however, exclude inheritance. The heir then does not become a member and instead receives a settlement share, a cash amount usually worked out from equity according to the financial statements. Where there is a sole member, inheritance cannot be excluded.

Until the probate proceedings are over, the interest has no full owner who can vote. A company whose sole member was also its only director may be left with nobody entitled to act for it, which puts payments, wages and contracts at risk.

How it works in practice

In family businesses we recommend settling inheritance in the articles in advance: whether it is allowed, whether the interest may be split between several heirs and how the settlement share is calculated. Together with a will and a succession plan, this lets the company survive an unexpected event.

Once probate is complete, the change of member must be entered in the commercial register, usually together with a change of director. The basis is the final certificate of inheritance. Until it is registered, the new members should decide on interim management.

Inheriting an interest is not subject to income tax for the heir, and Slovakia has no inheritance tax. The value of the interest does matter, however, because it may count as the acquisition price on a later sale. We help with valuation and documentation so that it can be proven later.

What to watch out for

The riskiest case is a company whose sole member is also its sole director, with no procurator or other authorised person. After their death it may take months before anyone gains the right to act. A second director or a procuration for a trusted person reduces that risk considerably.

With several heirs there is a risk of dispute over voting if the articles do not deal with splitting the interest. Splitting it between heirs may need the general meeting’s consent, and without clear rules a family dispute spills into running the company.