Does a shotgun clause in a shareholders' agreement still work if it's triggered by a shareholder's death?

It depends on how the agreement is drafted, and this is one of the more commonly overlooked gaps in shareholder agreements. A shotgun clause is built for a dispute between living, capable shareholders: one offers to buy the other out at a stated price, and the other can either accept that price or turn it around and buy the first shareholder out at the same price. That mechanism assumes both sides can actively choose, negotiate, and arrange financing within a set window.

Death disrupts that assumption. The deceased's estate trustee steps into the shareholder's position, but they may have no interest in running the business, no ability to raise financing to invoke the "buy" side of the clause, and a duty to the beneficiaries that doesn't necessarily align with how the clause was meant to work between active owners. Many well-drafted agreements deliberately carve death out as a separate triggering event with its own valuation and funding mechanism, often insurance-backed, rather than leaving it to the shotgun provision. If an agreement doesn't make that distinction, whether the shotgun clause actually applies on death becomes a question of interpretation that a lawyer should review before anyone tries to invoke it.