In March we commented on the importance of business succession planning and business LPAs and a recent case has further highlighted the need for business owners to consider planning for business succession.
In this particular case, the deceased was the sole director and shareholder of a company and although he left a will and appointed executors, the company’s articles of association prevented the executors being named as shareholders until they had obtained a Grant of Probate. The executors could not enter their names on the register of shareholders for the company and so were unable to pass a resolution as shareholders to appoint a new director who could then manage the company.
This was extremely important and urgent in that the company’s Bank had written to the executors to advise that following the deceased’s death they would not be able to operate the Company’s bank account without the appropriate authorities in place and therefore in effect the bank account was frozen. This meant the Company could not pay its creditors and fulfil its ongoing obligations. As a result, there was a real possibility the business would fail and deprive the beneficiary of part of their inheritance.
The executors had to make an urgent application to the Court for an order as it would take too long for the executors to obtain the Grant of Probate, given the nature of the estate. Whilst the executors were successful in obtaining the necessary Court Order, they were required to enter into specific, personal undertakings in order for the Court to be willing to issue the order.
This case highlights the need for business owners to carefully consider the position and bear in mind their company’s articles of association when looking to draft their will, so as to ensure that the administration of their estates can take place as efficiently and cost effectively as possible and without placing added burdens on their executors.
Colman Coyle has considerable experience in acting for business owners both in connection with their businesses and providing succession planning. If you would like to discuss the issues raised here, please contact Patrick Green on 020 7354 3000 or Patrick.firstname.lastname@example.org.