Why sole company directors/ shareholders need a Will

Ordinarily, if a director of a company dies, the surviving directors can continue to manage the company and may even make a temporary appointment, pending the appointment of a new director by the members and/or shareholders of the company. Equally, if the sole shareholder of a company dies, the directors can continue to manage it until the beneficiaries under the Will have the shares transferred to them. 

HOWEVER, where the sole director is also the sole shareholder, the risk of uncertainty is much greater.

Section 201F of the Corporations Act 2001 does provide that, in the event of the death of a single member/director of a proprietary company, the executor or other personal representative appointed to administer the deceased’s estate may appoint a new director to the company. The director has all the powers, rights and duties of the deceased director and can keep the company running until shares are transferred to beneficiaries who may then appoint new directors if they wish.

As mentioned above, the executor is ordinarily, and most efficiently appointed by means of a valid Will.

If there is no Will, however, a complicated Supreme Court application would have to be commenced by a near relative or other person of the director for ‘letters of administration’ to manage the estate and this could take some time – possibly months. If there are no available relatives or other trustworthy friends to deal with the estate, the Public Trustee may step in and administer the deceased estate – but this process would again take many months. Each process would be expensive and uncertain.

During that period of Court process there would be no director, so the company may be completely unable to operate or trade. Bills and staff could not be paid, Banks and the like could not accept instructions in relation to a company’s trading account if they are not satisfied there is someone properly authorized to act for it. The company’s reputation would be destroyed. Any potential purchaser would be unable to take over the business quickly. The assets and value of the company, which would be eventually filtered down to the possible beneficiaries of the estate, would be decimated.

Having a Will could save the loss of your business and the transfer of your life-long work. Lawcorp lawyers are here to assist you with any aspects of the above and invite you to call David Smarrelli on 9894 6888, who will be pleased to assist you.