There are around 5.7 million small limited companies operating in the UK. These businesses employ over 16 million people. Of the limited companies, in 2017, 60% are “Sole Proprietorships” meaning they employ just one person. That is around 3.4 million people. Most of us will know someone like this. I was told recently by an accountant, about an owner of a small limited company, who died unexpectedly. He had died without a Will. There were no other directors in the business.
Very quickly, practical problems emerged. As you would expect, the bank were told of the death, and they quickly closed the company bank account. This now meant that cheques and other payments could not be paid in to the bank. Furthermore, the funds in the company bank account couldn’t be released. So what should happen in a case like this? Firstly, it is always helpful to have a Will. You would normally, appoint executors to deal with your affairs, after your death, so this alone is very helpful. If there is no Will as here, the personal representatives of the deceased have to take responsibility.
It’s also helpful to have a separate person as Company Secretary in the business. The Company Secretary can appoint a new director to run the company. On a similar point, it is also useful to have a second signatory on the company bank account in case the director cannot act.
If there is no separate Company Secretary, the company articles would need to be checked to see if they allow the personal representatives to appoint a new director.
From a practical point of view, such questions may take time to sort out. This can make a death even more painful and stressful for close family. It can also cause problems for past customers of the business, who may be quick to go elsewhere. Ultimately, this can make the business less saleable. In conclusion, it is worth giving thought to these emergencies, before they arise by seeking professional advice.