According to recent research by Legal & General, over half of business owners have left no instructions in a Will or any special arrangements regarding shares; 26% were unaware that a directors loan account had to be repaid on death: http://www.legalandgeneral.com/advisercentre/campaigns/business-protection/state-of-sme.html (http://www NULL.legalandgeneral NULL.com/advisercentre/campaigns/business-protection/state-of-sme NULL.html)
Estate planning really is essential, especially if you own a company. Failing to take professional advice can store up unforeseen troubles for both your business and your loved ones. The point could hardly have been more powerfully made than by one High Court case concerning a company that was plunged into crisis following its founder’s death.
The businessman owned all the shares in the company and was its sole director. His death had left the company directionless, and without directors or a company secretary to guide it. Its bank account had been frozen, leaving it unable to pay its staff or tax liabilities. The executors of his estate launched emergency proceedings in order to save the business.
In upholding the executors’ application under Section 125 of the Companies Act 2006 (http://www NULL.legislation NULL.gov NULL.uk/ukpga/2006/46/contents), the Court directed that the register of companies should be amended to put the deceased’s shares in the executors’ names. This enabled the executors to pass a written resolution appointing a director of the company who would have the powere to put it back on an even keel.
Such relief is normally only granted after a will has been admitted to probate, but the Court recognised that the case was wholly exceptional. Given the company’s pending liabilities in respect of staff wages and a VAT demand, any delay could irreparably damage the business.