Are you the Sole Director and Shareholder?

If you are the sole director of your company, what happens if you die suddenly?

This can cause severe difficulties for the personal representatives who are looking after your estate unless the company’s Articles of Association make suitable provision.

This is especially an issue if you have built up substantial value within the company, either in cash or assets.

If yours is a recent company using the Model Articles which came into force on 1 October 2009, you do not have a problem, and there are ways to deal with the issue. But if your Articles are older or do not contain such provisions, you have a problem.

Without a director (or secretary) having the authority to register the personal representative’s or beneficiary’s name in the register of members, the company is effectively trapped in a vacuum. A personal representative or beneficiary cannot exercise any right as a shareholder unless they are registered in the register of members. As a result, they are unable to pass a shareholder resolution to appoint a director or to amend the Articles.

In such circumstances, it is necessary to apply to the court for an order to appoint a new director so as to bring the company out of its vacuum. This is an expensive and time-consuming mechanism.

So, what to do?

  1. Consider always having a second director, wife, child etc, who can make appointments in your absence.
  2. Make provision in your will for what is to happen to your shareholding.
  3. Check your Articles.

You should of course ensure that your will is, at all times, consistent with the company’s Articles in order to reduce the likelihood of any conflict or confusion between the two documents, with particular reference to the ability to transfer the shares on the death.

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