What Happens When A Sole Director/Shareholder Dies?

When a sole director shareholder of a company dies, the shares he or she owned would automatically pass to his or her Personal Representatives (PR).

Under section 773 of the Companies Act 2006, PRs are either the Executors of the Will, if the deceased had written a Will, or the Administrators of the estate, if the deceased died intestate and without a Will.

What Does The Personal Representative Need To Do?

Once the Personal Representative has obtained Probate or Letters of Administration the PR can transfer the shares to a person entitled receives the Estate – either the PR or the elected person is now the sole shareholder in the company.

However, at this point, the company is still without a director, and one must be appointed.

Under the Companies Act 2006 Model Articles of Association, the PR has the right to, in writing, ‘appoint a person to be a director’, so this process should be fairly straightforward.

When Is The Personal Representative Unable To Appoint A Director?

Where the situation becomes difficult to manage, however, is when the company is set up differently.  For example if the company has out-of-date or specially made Articles of Association, which may contain other provisions.

In order to appoint a director, shareholders have to vote. When a sole director shareholder dies, the PR can only attend and vote at a meeting if he or she is registered as a member of the company – and only a director can amend the company’s register of members, something that can’t happen if he or she has died. The situation becomes impossible.

What Happens In These Situations?

In cases like these, the PR has to apply to the court for the register of members to be amended and for his or her name to be added to the company’s register.

However, it is not guaranteed that the court will agree to this. This is why it’s so important for companies, especially the ones who were incorporated before 1 October 2009, to review their Articles of Association and update them if needed to ensure they are protected should the sole director shareholder die.

Sale of the Company

Often, the PR will wish to consider whether the Company should be sold.  These issues may need to be addressed before the sale can proceed.

Helping You With The Process When A Sole Director/Shareholder Dies

Our specialist legal team understands the complex process involved with appointing a new director when a director shareholder dies. It is not always straightforward, but we will ensure you receive tailored advice and guidance on the next steps to take in this situation – as well as advice on your company’s Articles of Association so you’re prepared for any circumstance in the future.

To speak to us about your company director needs, you can contact us at our Chorlton office on 0161 860 7123 or email chorlton@hlfberry.com or at our Failsworth office on 0161 681 4005 or email failsworth@hlfberry.com and we will be happy to help.