Sole directors hold a significant position within companies, as they are solely responsible for the management of the company.

When a company’s sole director and shareholder dies or loses capacity, it can leave the company unable to operate. Broader consequences arise if the company is the trustee of a trust, such as an inability to distribute income to beneficiaries.

The Solution

As a starting point, review the company’s constitution for any provisions addressing how the death or incapacity of the director should be dealt with.

If the company’s documents aren’t of assistance, section 201F of the Corporations Act 2001 (Cth) states that upon the death or mental incapacity of a sole director and shareholder, a person entitled to deal with their estate may appoint a replacement director.

Section 201F requires that there be a person entitled to deal with deceased director’s estate. Having a valid and up to date will and/or power of attorney is therefore particularly important for sole directors. It is also recommended that trust deeds make provision for alternative appointors, who usually have the power to replace the trustee.

Any changes in directorship must be formally documented and registered with ASIC.

Lessons

It is incredibly important to have your Will, company structure and trust deeds reviewed by a specialist estate’s lawyer and understand what will happen in the event of your death or incapacity.

Should you require assistance with appointing a new director, estate planning or reviewing your trust or company documents, our team can assist you. Madgwicks can help. Reach out to Eva Bluett, Lawyer.

The information provided in this article is general in nature and cannot be relied on as legal advice, nor does it create an engagement. Please contact one our lawyers listed above for advice about your specific situation.