No Will, No Way
Are you a sole company Director/Shareholder?
We have all heard of the adage – “Where there’s a will, there’s a way”.
Yes – that is the “other” will, but what are the consequences if you do not have a Will leaving your Estate to your loved ones thereby leaving your financial affairs in mid-air?
Apart from passing away intestate, there are other less obvious consequences. If you are a sole company Director/Shareholder and you do not have a Will or your Will does not specify a replacement Director/Shareholder, you may need to revise or initiate a new Will.
Generally, if a Director of a company dies without a Will, the surviving Directors will continue to manage the company and the Shareholders will appoint a new Director.
However, if you are the sole Director and sole Shareholder of the company and you do not have a Will, in the event that you are no longer around to call the shots, the company will be left without a Director. In this instance, there will be no one authorised to make management decisions on behalf of the company, instruct the bank or pay staff/suppliers. Hence, the company may be unable to trade without an appointed Director.
Pursuant to s201F of the Corporations Act 2001, in the event of the death of a single member/Director of a proprietary company, the Executor or any other personal representative appointed to administer the Deceased’s Estate may appoint a new Director to the company. The Executor is usually appointed by means of a Will. Once the Executor is appointed, they have temporary power to manage the company until a new Director is fixed.
In the event that there is no valid Will of the sole Director/Shareholder, it is possible for an eligible person, usually a relative, to be provided authorisation to manage the Estate. However, this involves the process of applying to the Supreme Court for Letters of Administration to manage the Estate, which can take months to be finalised. For the sake of smooth running of the company following your death, the most efficient and effective means of appointing a new Director/Shareholder is to specify who should become a Director within your Will.
The above is not only relevant when the sole Director/Shareholder dies, but also in the case of loss of mental capacity. For example, if the sole Director/Shareholder suffered a stroke, onet of Alzheimer’s disease or serious head injuries, rendering them incapable of conducting their business affairs, a replacement Director is required.
If you are a Director/Shareholder of a company and wish to revise or create a Will to protect your company after your death, please contact our Wills, Estates & Probate team.