Posted by Zoe Pettigrew, Solicitor
Death of a company director – what happens next?
Succession planning is critical for any company. In the unfortunate event that a director dies, often the surviving directors are able to step in and run the company, sharing out the responsibilities of the deceased director between them. But what happens if a sole company director dies and the company’s articles of association do not set out a procedure for what happens next?
Companies with multiple directors
Where a company has surviving directors, they will be able to file a termination of a company director appointment at Companies House and update the company’s register of directors. Practically, the surviving directors may also need to update employees, suppliers, clients, customers and the company’s bank, as well as arranging to share out the deceased director’s responsibilities.
Companies with a sole director
A private company must have at least one director, so if a sole company director dies, the company’s articles of association should set out a process for what happens next.
If a company was incorporated after 1 October 2009, has adopted the statutory model articles and has no remaining shareholders and no directors following a death, the personal representatives of the last shareholder to have died have the right to appoint a person to be a director. The personal representatives will need to give notice in writing to the company appointing the new director.
If a company was incorporated before 1 October 2009 and has adopted the Table A 1985 articles, the position is less straightforward. These articles do not deal with a scenario where a sole director and shareholder dies, so the personal representative of the last shareholder to have died must apply for a court order appointing a new director. This can be both a time consuming and expensive process, exposing the company to a period of real uncertainty.
No two companies are the same, so we often recommend adopting a set of bespoke articles of association to suit the specific needs of a business. Not only can this deal with succession planning, but also a wide range of issues such as decision making, conflicts of interest and share transfers. Ensure that your company’s articles do deal with the death of a director to ensure your company isn’t exposed to a period of real uncertainty, and unnecessary costs, in the event of a director’s death.
If your company’s articles of association need updating or if you are interested in adopting a bespoke set of articles, please contact Zoe Pettigrew or another member of our Corporate team:
01225 459 935 Email us
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