Executor’s Power to Sell Shares
In Eve v. Brook, 2016 ONSC 1496, a dispute arose largely due to the Estate Trustee’s sale of certain shares in a private company owned by 50% by the Deceased and 50% by his brother, Earl.
With respect to the sale of shares, the Will states, somewhat unusually:
“I direct my executors to consult with the other shareholders/owners of any business or property I own at the time of my death and to co-operate with such shareholders and partners to ensure that my executor can transfer, in specie, shares and interests to my beneficiaries in such a way as to restrict or exclude my beneficiaries’ involvement in the business, including conversion of shares into nonvoting shares and having my estate execute agreements having the effect of binding my beneficiaries.” (in clause 3 of the Will)
The Will also contains certain specific powers given to the estate trustee. These include “To sell or otherwise dispose of, at the time or times and in the manner that my trustees in their discretion decide upon, assets, investments, or money.” (in clause 4 of the Will)
Notably, there is a specific prohibition in the articles of incorporation of the company against a transfer of shares without the consent of a majority of the directors. Accordingly, Earl’s consent would be needed.
The Estate Trustee sold the Deceased’s shares to Earl, at the objection of the plaintiff, being the daughter of the deceased and a 50% residual beneficiary of the estate. She alleged that the sale was not authorized by the Will and was, in any event, improvident. She wanted the shares transferred to the beneficiaries in specie.
The trial Judge concluded that the Estate Trustee was authorized by the Will to sell the shares, and in so doing reviewed the differing interpretations of the Will as between the Estate Trustee and the plaintiff. If the Estate Trustee’s interpretation was correct, the Will only created a requirement that the Estate Trustee first consult with the other shareholders to obtain their views as to a potential change in ownership, then the Estate Trustee had no choice but to sell the shares given that Earl would not have agreed to the in specie transfer to the beneficiaries. On the other hand, if the plaintiff’s interpretation was correct, and the clause was so vague and ambiguous that it ought to be read out of the Will, the sale could still proceed by virtue of clause 4.
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