Blog article

Dealing with the death of a member

Our co-operative and community benefit society members often ask how to deal with the shareholding of a deceased member. Anthony Collins Solicitors have provided an outline of the considerations societies should make when they find themselves in this situation.

Societies will sooner or later find themselves dealing with the death of a member. In that situation, they will need to know what to do about any share capital that member might have in the society. The Co‑operative and Community Benefit Societies Act 2014 contains some provisions about certain situations, but the rules in the Act are not comprehensive – and sometimes the rules of the society will not clearly spell out what should happen. Here we set out the principles of how to deal with this situation.

First of all, of course, there is a distinction between the situation where the society is properly informed of a member’s death (eg by the next of kin), and where communication simply ceases. The latter is normally dealt with under separate provisions in the rules, so societies should be clear which situation they are dealing with.

The distinction is important, as under many model rules, a member automatically ceases to be a member if they die. This applies whether or not they have previously made any nomination in respect of any shares they held.

On death, the deceased member’s shares in the Society become part of the estate of the member in question. Those shares may be the subject of a “nomination”, in which case the society’s rules and sections 37-39 of the Co‑operative and Community Benefit Societies Act 2014 (the Act) apply. If there is a nomination then the nominee becomes entitled to the shares (or any loans, deposits, or other “property” in the society) owned by the deceased.

Sections 37 and 38 of the Act set out some requirements in relation to nominations, including (intriguingly) the proviso that a nomination is only valid for the first £5,000 of any shares. Section 39 contains directions on either transferring the shares to the nominee or paying out the value.

If there is no nomination, then section 40 of the Act applies again where property held in the society (shares, loans or deposits) is less than £5,000. Section 40(2) allows a society to pay that property to “such persons as appear to the committee [the Board of Directors] (on such evidence as it considers satisfactory) to be entitled by law to receive it.” Under section 40 the society may ask for proof of entitlement but does not have to do so (though we would always recommend this as good practice).

The rules will often deal with the situation where the deceased member’s personal representative contacts the society, and typically give the Board discretion either to pay out the property held, or to transfer the shares to whoever the personal representative directs.

If, however, property in the society is more than £5,000, or there is no obvious next of kin, then section 40 of the Act does not assist the society. If there is no approach from a personal representative, then the rules may not apply.

In the absence of any nomination, any approach from the deceased person’s personal representatives, or any next of kin, then our view (supported by our probate advisors) is that paying the funds into a suspense account pending any subsequent approach is the sensible route to take.

We have worked with our lawyers Anthony Collins Solicitors to produce this blog. Co‑operatives UK’s advice team are on hand to provide support to our members who are faced with the death of a member. Contact us if you need help, by email at [email protected] or by phone 0161 214 1772.


Written by Anthony Collins Solicitors
Updated: 03/07/2019