Companies that have a person registered as both the sole director and sole shareholder could be taking a big risk if the director dies without leaving a Will.
The company could have difficulty continuing to operate or it could be wound up.
Under the Corporations Act, if a single director of a company dies, the executor or personal representative appointed to administer the deceased’s estate may appoint a new director to the company having obtained a grant of Probate from the Supreme Court. The transitional director has all the powers, rights and duties of the deceased director and can keep the company functioning until shares are transferred to beneficiaries who may then appoint new directors. But if there is no valid will, a relative or other person would have to apply to the Supreme Court for letters of administration to manage the estate. This generally takes longer than an application for a grant of Probate.
While an option would be for the Public Trustee to be appointed to administer the estate, this procedure could take several months. A trading company in this situation would be unable to proceed with financial arrangements, might lose valuable work or incur penalties because it is unable to complete contracts.
It is therefore vitally important that a sole director who is also the sole shareholder of a company makes a valid Will. The Will can even nominate who the testator wishes his or her executor to appoint as a replacement director.
Contact David Vilensky at firstname.lastname@example.org if you wish to discuss this matter or your estate planning objectives further.