If you are reading this, we assume you are currently in the midst of bereavement. So first of all, our condolences. In this blog post, we are going to clearly set out what to do if a company director dies (the director being the person tasked with the day-to-day running of a company).
The following information covers this scenario for a private company limited by shares.
Let’s get started.
The authority to appoint a new director
The reason this is a somewhat tricky subject (apart from the obvious) is that typically, directors and shareholders are the only people who have the power to appoint new directors and add new shareholders.
How to proceed very much depends on who is still involved in the company – if anyone – when a company director dies.
If the deceased director was not the only director (and not a shareholder)
A private company limited by shares can be operated with just one director (unless stipulated otherwise in the company’s articles of association), so there is no necessity to appoint another director in this instance.
If the existing director does decide to carry on with the business and wishes to appoint a new director rather than continue as is, normal appointment protocol should be followed. This includes:
- The passing of a resolution of members at a general meeting (or by written resolution)
- The filing of the AP01 (Appointment of director) form
Regardless of if a new director is appointed or not, Companies House needs to be notified about the death within 14 days. To do this, the TM01 (Terminate an appointment of a director) form should be completed and sent – online or via the paper method – as soon as possible.
It’s also important to update the company’s statutory register of directors and notify all necessary business contacts about the situation, such as employees, HMRC, banks, suppliers, and so on.
Moving briefly away from the limited by shares company structure, a public limited company (PLC) must have at least two directors appointed at all times. If a PLC is operating with two directors and one dies, all steps should be taken to appoint a new director as soon as possible.
If the deceased director was also a shareholder (but there is still an existing director or shareholder in place)
The above steps should be followed, but also, the shares of the deceased will need to be transferred in accordance with:
- The will of the deceased if one was put in place, or
- The rules of intestacy (when no will has been put in place), or
- Any provisions outlined in the shareholders’ agreement or the company’s articles
Existing directors and shareholders will authorise this transfer.
If the deceased director was the sole director and sole shareholder (they owned and ran the company themselves)
This is the most complex situation as there is no one else in the company to appoint a new director.
If the company was formed on or after 1st October 2009 (and so was formed under the Companies Act 2006) and with model articles of association, the personal representatives of the deceased have the power to appoint a new director.
When the new director has been appointed, said director then has the power to transfer the shares (of the deceased) in line with the will or rules of intestacy.
However, if the company was formed before 1st October 2009 (and so under the Companies Act 1985), the personal representative of the deceased does not (normally) have the power to appoint a new director. In this situation, they would need to get a court order. Unfortunately, this can be time-consuming.
When a sole director/shareholder dies, the TM01 (Terminate an appointment of a director) form can be completed by the ‘person authorised’ (as stated on the document). This could be, for example, the person who is looking after the estate of the deceased.
Regarding share transfers
If the deceased company director was a shareholder, it’s worth noting that the share transfer process can be a lengthy one (when compared to how long a transfer would normally take). This is because everything must be done in accordance with the estate or executor of the will.
The importance of the articles of association
Whilst preparing for the death of a company director is not always possible, we recommend that business owners constantly review their company’s articles of association – updating them to make sure they meet the changing requirements of the business. This can make life simpler further down the line.
For example, if the articles of association state that a company must have two directors in place at all times (when one is the standard), consider whether this is necessary.
To confirm, the companies that we form are incorporated using a set of articles of association where no such stipulation is in place (unless this is changed manually during the company formation process).
Locating a company’s articles of association
There are a number of ways to view a company’s articles of association.
If the company was formed by us:
- Log in to 1st Formations
- Select ‘My Companies’
- Click on the appropriate company name
- Navigate to and open the ‘Documents’ tab
- Scroll to the ‘Memorandum & Articles (Full Document)’ and select ‘Download’
If the company was not formed by us:
- Visit the Companies House ‘Search the register’ tool
- Type in the company name
- Click on the correct result
- Navigate to and open the ‘Filing history’ tab
- Scroll to the ‘Incorporation’ documents (the first documents filed) and select ‘View PDF’
Services we offer
Whilst not created specifically for when a company director dies, we offer a number of services that may be of use to you.
Take a look at the information below and please get in touch if you have any questions.
Director Appointment & Resignation Service
Making a new director appointment or removing an existing director isn’t a simple case of completing the necessary form and sending it to Companies House. You also need to take care of the appointment/resignation letter as well as the board resolution.
With this service, we’ll take care of everything to ensure your director appointment or resignation is completed correctly.
Confirmation Statement Service
If your company has had a change in its shareholding situation, you should notify Companies House as soon as possible, and the only way to do this is to file a confirmation statement.
With this service, we will send you a short questionnaire about your company and then complete and file the CS01 form on your behalf.
Company Dissolution Service
There are a number of reasons why you may wish to close your company and have it struck from the Companies House register.
Perhaps you have missed your annual account’s due date and would rather close the company than file the accounts late and pay the necessary penalty.
Maybe the business has simply served its purpose and it’s time to close it down.
Or, as we have covered in this blog post, a company director dies and the company is no longer required.
Whatever your reasons for wanting to close a company, we can help you do it properly.
Full Company Secretary Service
Make sure your company is fully compliant by getting an appointed, named secretary who can maintain your statutory registers, make changes to your company (correctly) and prepare your confirmation statement.
All of this, plus a dedicated account manager on hand to answer any questions you may have about running your company compliantly.
Thanks for reading ‘What to do if a company director dies’.
We appreciate that this may be a difficult time for you and your company. However, we hope this post has answered any questions you may have about what to do if a company director dies. If you have any further queries, please don’t hesitate to leave a comment or call us on 020 3897 2233.