Agreement first: the partition agreement
Where the heirs can agree, there is no need to go to court. A partition agreement between heirs is valid in written form; no notarial or official form is required even for real property in the estate. This is a particularity of estate division and it saves months.
The agreement is worth drafting in detail: which property goes to whom, how differences in value are equalised, in what order the land registry transfers are made, and who bears the costs. A partition agreement drafted loosely replaces one dispute with another.
Dissolution of co-ownership and mandatory mediation
Where no agreement is reached, an action for dissolution of co-ownership is brought. Mediation is now a condition of bringing such an action: a claim filed without it is dismissed on procedural grounds.
The court first considers whether the property can be divided in kind. Where that is not possible or does not suit the co-owners’ interests, it orders dissolution by sale, conducted by the sales office through a public auction.
Restricting the sale to co-owners
At public auction, property frequently sells below market value. There is a practical way to change that: where all co-owners agree, the auction may be held among the co-owners alone.
The property is then not opened to third parties; the co-owners bid against each other and it stays within the family. In practice what matters is that the request is filed in time and with the participation of every co-owner — objections raised later do not change the outcome.
- All co-owners must join in the request
- It must be filed before the sale stage
- Third parties are kept out of the auction
How heirs affect a shareholding
That company shares form part of an estate is a risk most family businesses notice late. On a shareholder’s death the shares pass to their heirs, and the company can find itself in partnership with people it has never met. Holding the overwhelming majority of the shares does not by itself prevent this.
In a joint stock company, the transfer of registered shares may be restricted by the articles; where shares pass by inheritance, the company may refuse approval only if it offers to take the shares over at their real value. In a limited company the passing of shares may be regulated in the articles. Either route has to be put in place during the shareholder’s lifetime and with the rules on reserved portions in mind.
Frequently asked questions
Is mediation compulsory before an action for dissolution of co-ownership?
Yes. Applying to a mediator is a condition of bringing the action, and a claim filed without it is dismissed on procedural grounds.
Can we keep the property from being sold to outsiders?
Where all co-owners agree, the auction may be restricted to the co-owners. The request must be made before the sale stage and with everyone’s participation.
I hold ninety-nine per cent of my company. Will heirs still become shareholders?
The size of the holding is not decisive on its own. Without a provision in the articles governing how shares pass to heirs, and a transfer mechanism to go with it, the heirs acquire shareholder status. The arrangement has to be made in advance.
Does a partition agreement have to be notarised?
Written form is sufficient for a partition agreement between heirs, and no official form is required for real property in the estate. Drafting it fully and clearly is what prevents later disputes.