Sole Shareholder/Directors

If you’re a sole shareholder/director, you may think you don’t need to put much thought into your company’s Articles of Association because a lot of the bespoke arrangements in Articles are about relations in multi-shareholder/director companies but there is one particularly crucial question: what will happen to your company if you die?

Dying without the appropriate article in place can create a paradoxical situation where your executors/beneficiaries can’t be formally registered as shareholders without a director to write them into the Shareholder Register and no registered shareholder to appoint a director. Without a director, the Company’s bank accounts will be inaccessible, wages and other outgoings can’t be paid and the Company’s continued existence is at risk. The only solution at that point is an application to Court, an unnecessary task and expense for the executors.

Technically, the original expectation was that a Court order would only be given after the Grant of Probate had been issued but it now takes such a long time to get a Grant of Probate that the Courts have shown a willingness to exercise their discretion to rescue companies from the consequences of having no director for an extended period of time, making orders to resolve the problem before the Grant of Probate is issued. On one such occasion, HMRC even intervened because VAT couldn’t be paid while a company’s accounts were frozen.

The best remedy is to ensure that your Articles are fit for purpose now. If your company was formed after October 2009, you’re probably fine. The Model Articles include an article which provides for a situation where a sole shareholder/director dies. It is possible that you excluded that model article when the company was formed, though, so this should be checked.

If your company was formed under the Companies Act 1985, it’s likely that the Articles will need to be changed to provide for the mechanics of transferring your shares and appointing a new director following your death. It’s a relatively painless process and far better to deal with it now than to leave this loose end for your loved ones (which could have an impact on any employees too).

If you’d like to discuss succession planning for your company at the same time, we would be happy to help and our Wills, Probate and Lifetime Planning team are always happy to assist with writing your bespoke Will.