Death of sole shareholder-director: business continuity

Published on
2 min read

A recent case highlights the practical difficulties on the death of a sole shareholder-director where a company has the default articles of association known as “Table A” articles.

The recent case is Martin Williams, Gareth Williams and Wendy McCreath v Russell Price Farm Services Ltd.

Table A articles apply to any company that did not adopt its own articles on incorporation prior to 1 October 2009 and it is still very common for such companies to exist despite the risks.

What is the issue?

All control and decision making ability is vested in one individual by virtue of them being a sole shareholder-director. If that individual dies, control of that company is lost and its assets effectively locked. A lack of authority means that contracts cannot be signed and even bank payments are not possible, leading to the inability to pay employees, suppliers and other parties.

Table A articles do not allow for the personal representatives of the deceased to appoint a director to keep the business from failing.

What happened?

This case involved a, thankfully, successful application to court to rectify the company’s register of members by the executors. However, the court required the executors to provide onerous undertakings – this could have been avoided if, prior to his death, the deceased had made a simple amendment to the articles.

What can I do?

If you are the sole director-shareholder of your company, you should consider reviewing your articles to ensure that they adequately deal with the legal consequences on death. This is particularly important if your articles pre-date 1 October 2009.

 

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