For example, there will be no ability for employees to be paid, suppliers invoices to be settled, and contracts to be fulfilled as there will be no one in a position authorised to make such decisions to bind the company. As a result, failure to act quickly and effectively could lead to catastrophic consequences for the business.

What powers do the deceased’s executors have under current legislation?

Under current legislation, companies that have adopted the standard (Model) Articles of Association will have a provision giving power to the executors of the deceased director and shareholder to appoint a new director.

However, often companies have bespoke articles or articles that were drafted under previous legislation where no such provision in the articles exists.  In such circumstances, executors have no one who can enter them into the register of members as there is no director.

Next steps for executors

In circumstances where the articles contain no suitable provision for the death of a sole director and shareholder, the company gets into a loop it cannot get out of easily. The only director and shareholder has died and the executors of the deceased director/shareholder’s estate have a right to be entered on the register of members. However, there is no director to enter them on the register. Where the executors aren’t registered as members, they have no power to appoint a director and so the loop goes on.

To get out of this difficult scenario and ensure the company can continue to run as normal, the executors of the deceased director and shareholder must then apply to the court for a rectification of the register of members of the company such that they obtain a court order allowing them to be entered on the register of members and this registration then enables them to appoint a director.

This process though takes significant time and incurs costs.

What to consider for sole directors and shareholders?

Sole directors and shareholders should therefore take appropriate measures to avoid possible problems following their death. Putting suitable plans in place while you are still fit and well will ensure the smooth running of the company and protect the value of the business in the unfortunate event that you pass away.

• Consider whether the appointment of more than one director is appropriate. Were a director then to pass away, there would be another director who could progress matters.
• If you still want to remain a sole director, check your company’s articles of association. Make sure that these allow for executors to appoint directors and update this if necessary. This amendment will be done via a special resolution.
• Ensure that your will is up to date and has the necessary provisions for how the shares in your company will be dealt with post-death. If you require any assistance with this then please contact a member of our private client team.
• Consider succession planning. Consider when are you likely to leave the company and whether there is anyone within the business who could be promoted to succeed yourself. What would happen to your Company if for any reason you became incapacitated? Is a Business Lasting Power of Attorney  (LPA) appropriate for you?

If you require any assistance regarding the death of a sole shareholder and director, please contact our Head of Business Team, Corri Pedrick. Our specialist team has years of experience assisting with the matters outlined in this article and can review your company’s articles of association, look at the provisions of your will or help you consider a Business LPA.