Sole directors may create an uncertain future

by Debbie Reed, Director

Without a valid and appropriate Will, sole directors who are also sole shareholders may leave an uncertain future for their loved ones.

Individuals who are both sole company director and sole shareholder run a great risk if they do not have a valid and appropriate Will in place. The consequences of their passing could be serious and far-reaching for the loved ones they have worked hard to protect. Further, the company itself could have difficulty continuing to operate or may need to cease trading operations. If you’re a sole director who is the sole shareholder, here are the reasons why a Will is critical for protecting your family and your company.

Usually, if a company director dies, the surviving directors can continue to manage the company. Equally, if the sole shareholder dies, the directors can continue to manage the company until the shares are transferred to beneficiaries. But where the sole director is also the sole shareholder, the risk of uncertainty is much greater.

The Corporations Act 2001 states that in the event of the death of a single member/director of a proprietary company, the executor or other personal representative appointed to administer the deceased’s estate may appoint a new director to the company. The director will then have all of the powers, rights and duties of the deceased director and will be able to keep the company running. Once the company shares are transferred to the deceased’s beneficiaries, they can appoint a new director if they wish. It is essential to understand, however, that this provision relies on the sole director / sole shareholder having a valid Will that appoints an executor.

If such a Will is not in place, a near relative of the deceased would need to apply to the local Supreme Court for permission to manage the estate. This process can take weeks, if not months. In the absence of any immediate relatives, the Public Trustee will become responsible for administering the deceased estate, which could take much longer.

Without a legally authorised representative to act on behalf of the company, it may be unable to trade and financial Institutions may be unwilling to accept instructions in relation to the company’s trading account. This may result in staff and suppliers not being paid, which can quickly have a negative effect on the reputation and value of the company, with consequences for the beneficiaries of the estate. Additionally, if a potential buyer is willing to purchase the company, they may not be able to do so quickly because there will be no recognised owner of the shares to authorise their transfer. Even if the decision is taken to wind up the company so all beneficiaries can be paid out, any delay may lead to the value of the company falling because it has ceased to operate.

The crux is that where a single individual is both sole director and sole shareholder of a company, he/she needs a Will that names a valid executor whom he/she trusts to make sound decisions for the company. The benefits include the value of your hard work being realised upon your passing and an orderly transition of business and assets. Most importantly, you will be confident that your family will not be forced to manage difficult financial circumstances during a period of emotional distress and upheaval.

DLA Partners can help you prepare properly for the future and avoid consequences that may be severe and costly. To find out more, please contact DLA Partners by phoning (07) 3863 9444 or by emailing


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