In the course of estate planning, it is not uncommon to arrange for one's shares to be left to one's heirs. No one can control what happens when the time of passing comes, but a lifetime of careful building of a stake in a company and a detailed will specifying who gets what percentage of the shareholding are steps one can take1.
However, complications may arise when the company is wound up despite being solvent. It is counter intuitive that the surplus on winding up should not go to the beneficiaries who are to take the shares under the provisions of the will. Yet that is what a residuary beneficiary tried to argue, relying on section 259 of the Companies Act (Cap. 50) which provides that:
"... any transfer of shares ... made after the commencement of the winding up by the Court shall unless the Court orders otherwise be void".
If the residuary beneficiary was right, then the entire surplus would go to the residuary beneficiary.
The Court of Appeal in Seah. Teong Kang v Seah. Yong Shwan  SGCA 48 decided that the section did not mandate such a counter intuitive result. The beneficiaries who were to take shares in the company received the aliquot share in the surplus of the winding up instead.
In coming to its view, the Court of Appeal usefully clarified that all interests in the shares of the testator pass first to the executor of the will, and when he acknowledges the shares are no longer required for the payment of the debts of the state, funeral expenses or general pecuniary legatees, the equitable interest in the shares moves to the relevant beneficiaries and the executor holds the legal interest on trust for them. The Court further commented that section 259 in fact did not apply to transmission of the shares upon the passing of the shareholder but to transfers of the shares.
The same principle applies for other assets of the estate apart from interests in shares. In general, when an executor assents, whether expressly or by conduct, to divest an asset in favour of the beneficiaries, his role as an executor ceases and he becomes a trustee for the asset. The asset is then released from payment of debts, and the beneficiaries are able to take the asset free of other outstanding liabilities.
The testator in Seah Teong Kang passed away in early 2011. The Court of Appeal's judgment was released last week. The company in question had been family owned. The case is yet another example of the need for careful estate planning, in particular where there is a desire that the underlying business continues. As noted by the Court of Appeal, this area involves ".....the confluence of two quite different areas of the law, viz. company law and the law of wills". The Court was too polite to say that the merged waters are somewhat choppy, but the decision demonstrates the effort needed to navigate the legal currents.