The death of one of the participants in a farm can be a critical challenge for the entire business. Judicial practice shows that without clear provisions in the statute, the situation can get out of control. A recent webinar by the All-Ukrainian Farmers’ Congress revealed an important legal reality: your statute can either protect your business or be the cause of its collapse in times of conflict.
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What happened
The founder of the farm passed away. He left behind a wife and two adult children. By law, all three became heirs to his share in the farm, which was 50%.
Previously, there were two participants in the farm, now there were four. However:
The wife had no understanding of agriculture
The son lived abroad
The daughter had her own business and did not want to engage in farming
Issues that arose
Inability to make any decisions
Most decisions required the consent of all
The son was unreachable
The wife was afraid to sign anything
Blocking of finances
Could not take out a loan for planting
Could not enter into agreements for the sale of the harvest
Current payments were stalled
Risk of losing land
Heirs did not renew lease agreements
Part of the land was lost
Villagers started looking for other tenants
Why did this happen
The statute did not specify:
Whether heirs automatically become participants
Whether the consent of other participants is required
What to do if there are multiple heirs
Whether compensation can be paid to them instead of entry
The deadline for heirs to decide
What should have been done
Experts from the All-Ukrainian Farmers’ Congress recommend including several scenarios in the statute:
Option 1: Mandatory consent Heirs can only become participants with the consent of the rest of the participants. If there is no consent, they are paid the value of the share.
Option 2: Automatic entry of one heir If there are multiple heirs, they decide who will become a participant. The rest are paid their share in cash.
Option 3: Compensation payment Heirs cannot become participants; they are paid the monetary equivalent of the deceased’s share.
Option 4: Flexible approach Heirs have 6 months to decide: either join the farm (with the consent of others) or receive a payment.
Important nuance with land plots
If the deceased participant contributed their own land plots to the statutory capital, the situation becomes more complicated:
The land becomes part of the inheritance
Heirs become owners of the land
But the share in the farm is a separate issue