Thursday, April 14, 2011

Sole director companies – An estate planning tip

During the week, due to a rather unfortunate set of circumstances, I was reminded of a very important provision under the Corporations Act.

The situation broadly was as follows:

1. The sole director of a number of companies suddenly passed away.

2. A number of third parties (including a financier) questioned representatives of the deceased director’s estate about the authority for the company to continue to act and in particular, requested copies of the deceased’s will.

3. The deceased director in fact died without a will.

While there will be a number of issues that arise in relation to the director dying intestate (including the way in which the shares in the various companies are to be distributed amongst the family members), the immediate issue concerning who had authority to act as director of each company was resolved by a particular section of the Corporations Act.

In particular there is a section that allows the legal personal representative of a sole director company to take steps to appoint a new director.

While a fairly significant amount of additional paperwork has been required because of the absence of the will, the various concerns of the financier have at least been managed for the time being.

Given the number of public holidays over the next 10 days or so, unless a particularly time sensitive issue comes up, there will not be a post for a couple of weeks and today’s post is made ‘early’ (normally it would be posted next Monday).