Death of the only director and shareholder

[Pinkpeterpan]

My dad is the sole director and owns 100% of the Ltd company shares. As the company was started in the 90s there is also a company secretary.
My dad has terminal cancer and not really coming to terms with reality or putting a succession plan in place.
He thinks the staff can make the business continue and it can be wound down after he's gone.
The business ticks over but is not very profitable but it does hold a huge amount of stock and he's not giving us clear answers about the company's debts (we believe there are rent arrears) so have no idea whether it's worth anything to sell or make insolvent.
Are we right in thinking that his 1 share will be passed to the beneficiary in his will? (My mum).
My mum wants nothing to do with the business and can't cope with the added stress that the business will bring to her upon my dad's passing.
We are very concerned about the future of his loyal staff and any legal obligations to them. We don't know what to do or where to start in making it all disappear in a time of grief and making my dad understand he needs to put a plan in place so my mum isn't liable for this mess!
Any advice or pointing in the right direction would be greatly appreciated.

 

[Supercoach]

Do you know if he actually has made a will and if so do you know that he has left the business to your mother?

 

[Pinkpeterpan]

He has a will where any assets are left to my mum. The business is not actually mentioned or specifically left to anyone. My mums solicitor only mentioned yesterday that she will be the beneficiary. I'm thinking today I need to suggest that he amends his will to leave the business to somebody else or he creates new directors asap so they can sort the business out.

 

[Supercoach]

If you can persuade him to appoint a new director that will certainly go a long way to alleviate any problems that will arise when he dies.
In the meanwhile, the company secretary should be able to gain access to bank account information etc so you can assess the situation.

 

[Pinkpeterpan]

Thank you for your response. I think appointing new Directors will be essential, just not sure who will want this burden! I'm printing my facts and will take the bull by the horns this afternoon, he's very sick and nobody wants to be having these conversations but better now then when it's too late.

 

[Supercoach]

It's difficult but essential to at least protect the people who have worked alongside your dad in the past; I am sure you can tailor your approach to make your appeal acceptable to him.
The first thing for the new director (and possibly only needing to be done short-term) or existing company secretary to do is to get control of the bank account and get the facts regarding the trading position.
With the facts established you or the director/s can take advice regarding the next steps.
If your father dies without this being done the problems escalate with banks anti-money laundering processes and demands for documentation that does not exist (for example, a probate certificate), strangling efforts to rescue the company for months. Add to this creditors and employees not getting paid . . .
I am certain that you taking the initiative is the right thing to do.

 

[The Byre]

(for example, a probate certificate), strangling efforts to rescue the company for months.

Excellent point!!! That alone can kill the business.

Banks are not allowed to give you any access to accounts without a certificate of probate and that will take many weeks, if not usually a few months.

That means a few months, during which wages, rents, invoices and taxes are just not paid.

 

[billmccallum1957]

Is he capable of managing the business now? If not he really should give someone power of attorney to manage his affairs if he is incapable, that person could appoint a new director.

 

[ffox]

Is he capable of managing the business now? If not he really should give someone power of attorney to manage his affairs if he is incapable, that person could appoint a new director.

If I remember my company law correctly a director cannot appoint an attorney to act on his behalf on company matters unless the business articles of association expressly allow it.
An attorney can be appointed, but will only be able to act on personal matters and not on those of the company. The attorney cannot therefore appoint a new director.
I think the company secretary may be able to take some control. but still not all. Much better if the current sole director appoints a successor officially before he is incapable of doing so.

Maybe one of the legal bods on the forum could confirm if that is the case or not.

Hope this helps.

 

[billmccallum1957]

But the OP's father, as the sole shareholder, can change the articles to allow it.

 

[ffox]

But the OP's father, as the sole shareholder, can change the articles to allow it.

True.

 

[Supercoach]

Is he capable of managing the business now? If not he really should give someone power of attorney to manage his affairs if he is incapable, that person could appoint a new director.

You can only make a power of attorney if you are capable of making decisions - the OP may be a little too late for this and it will certainly hold the process up.
The simplest way to tackle the company situation is for a new director to be appointed and a change of bank mandate.
The overall situation and plan regarding the OP's father can be determined later.

 

[Lisa Thomas]

I am sorry to hear about your Dads health.

As the others point out although the shares might be left to your Mum that doesn't give her control (even if she did want it) to sort the business out.

Only a Director can do this and although I wouldn't normally recommend someone become a Director of a Company without establishing first whether or not it is solvent I think the tidiest way to deal with this Company would be for a new Director to be appointed, even if this means they then subsequently just close the business down.

If it transpires the Company is insolvent or becomes insolvent as a result of your Dad's passing then the new Director will need to speak to a licensed IP.

I'd be happy to speak to you and give you some advice.

01752 786800.

 

[The Resolver]

I agree with the above. I do not see any real problem. A little bit of pragmatism will help. As to appointing directors now, all the father has to do is sign a Resolution appointing a director(s) - no formality needed for a meeting as he is the sole shareholder. If even signing is difficult he can just declare his vote to the son or wife who then makes a note/recording of what said. The companies register can then be updated with the names of the new director(s). Once he as sole shareholder declares his decision to appoint X , Y and Z as directors then one of them can file the appointment form at Companies House. CH do not require evidence. Once the directors are shown at CH the bank will have to act on their requests.

If they find the company is insolvent and do not wish to continue they are always able to resign. For that reason the son or the wife should perhaps also be one of the new directors.

If this is not done , perhaps because the father does not have adequate health to be competent to make decisions, and he passes away then the wife can effectively appoint directors immediately claiming her position as sole shareholder under the Will without formally waiting for the Probate. The problem would only arise if there was a challenge but given what is said there is not going got be a challenge to her share ownership. Again CH will not challenge the notice of appointment.

She then has options such as to negotiate a management buy out. The stock may no doubt give it a healthy asset value even if trading at a loss.

 

[Lisa Thomas]

You might like to bear in mind the comments on this thread as regards leaving a Company Directorless:

http://www.ukbusinessforums.co.uk/t...le-director-has-resigned.370002/#post-2723435

 

[TODonnell]

First, I am sorry to hear of your trouble. The passing of a parent is not an easy matter.

In practical terms, whoever has access to the Companies House account controlling your company's listing can add a director quite easily using their online forms.

Usually, the person who submits the annual returns, usually the accountant, has this access: https://ewf.companieshouse.gov.uk//seclogin?tc=1

Or it may be your Dad.

You set up an account there like you would on Facebook and then request an authentication code to be posted to the registered office, if you don't have one already.

I don't recommend messing around on there unless you know what you're doing but it's a handy fall-back in the event of bungling and inertia and it's not rocket science, either.