Why Sole Directors Should Have a Will: Legal Advice

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A business owner without a will can have devastating consequences, writes legal expert Pippa Colman.

Section 201F of the Corporations Act 2001 provides that upon the death of a sole director or shareholder of an owner company, the executor or other personal representative appointed to administer the estate of the deceased may appoint a new director. .

But if there is no will, there is no executor and there is no personal representative.

A lot of business people have a business.

Many of them are the sole director and shareholder of their company.

While everyone should have a will and a power of attorney, for those directors and shareholders alone this is doubly important, because if they die without a will then everything stops.

If there is no director and no shareholder to appoint another director, then the company is unable to function.

As no one is authorized to act for the company, it cannot trade.

Banks are unable to accept instructions for a business bank account.

Staff and suppliers cannot be paid.

If a person is willing to buy the company or its assets, that person may not be able to do so without a director or lawyer to authorize their transfer.

The recourse consists of submitting an application to the Supreme Court for the appointment of an administrator.

It can take weeks or months, and longer if there is a competition over who should be nominated.

So what are smart people doing?

They have a will, which appoints an executor, who can then appoint an administrator, and their will provides for the transfer of shares.

They also ask their company to give power of attorney to another person, so that the company will continue to operate on the death of the sole director.

Don’t make the mistake of thinking that a continuing power of attorney gives the right to an attorney to assume the role of director… it doesn’t!

A general power of attorney by a business will ensure that the attorney can manage the business bank account, pay employee salaries, appoint a new manager, or sell the business of the business.

If you are a single director and sole shareholder and you don’t have a will or power of attorney for your business, call your lawyer now.

Pippa Colman is the founding director of Pippa Colman & Associates Law Practice


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