A note to Sole Directors and Shareholders

If you die without a valid will (i.e. you die intestate) administering your estate can be more complicated and cause significant issues or delays for your loved ones. 

If you are a sole director and shareholder of a private company, the impact can be greater and having a valid will is vital.

If you die leaving a valid will, an application is made by the person named as the executor in the will to the Supreme Court for a Grant of Probate. 

However, when there is no valid will, an application for a Grant of Letters of Administration must be made for the Supreme Court to authorise a person to deal with the property and affairs of the deceased person.

The Supreme Court will grant of Letters of Administration if it is satisfied that:

  • the deceased died without leaving a valid will;
  • the applicant is under the Administration Act 1903 (WA) entitled to a benefit from the estate;
  • the application has the written consent of any other person who is entitled to apply; and
  • the applicant has sworn to the value of the assets and liabilities of the deceased as at the date of death.

The requirement to obtain the written consent of other people entitled to apply for Letters of Administration can cause delays in making the application if, for example, there is any dispute about who should apply for the grant or if persons whose consent is required cannot be easily located or contacted.

Death of a sole Director/Shareholder

In a company with more than one director, if a director dies, the surviving directors can manage the company and make a temporary appointment to fill the casual vacancy, pending the shareholders appointing a new director.

However, when a sole director and shareholder dies, the company is left without any person properly authorised to immediately manage the affairs of company.

Section 201F of the Corporations Act 2001 (Cth) provides that if the sole director and shareholder of a proprietary company dies, the executor or other personal representative appointed to administer the deceased’s estate may appoint a new director to the company.  The director then has all the powers, rights and duties of the deceased director, and can manage the company running until the deceased’s shares are transferred to beneficiaries.

However, this section only operates once an executor has been appointed pursuant to a valid will and probate has been granted, or an application for a grant of letters of administration has been completed, and an administrator has been appointed by the Supreme Court of Western Australia.

If a sole director and shareholder dies without a valid will, and an application for Letters of Administration has to be made to the Supreme Court, if there are delays in obtaining the consent of other potential applicants for Letters of Administration, there is potentially a period of time during which the company will be without a director and unable to operate.

With no person authorised to make management decisions for the company it may be unable to trade, financial institutions may be unwilling to accept instructions, and the company may not be able to pay staff or suppliers.

Further, if there are delays obtaining Letters of Administration, problems can arise if someone is willing to purchase the company. There will be no legal owners of the shares who can authorise their transfer until an administrator of the estate has been appointed by the Supreme Court. Further, if the decision is made to wind up the company, any possible delay in making such an application could affect the value of the company if it had been unable to operate in the interim period.

Lavan comment

The potential difficulties and delays associated with applying for Letters of Administration can have a significant effect on the operation and value of the company, and are easily avoided by making a valid will. 

If you are a sole director and shareholder of a private company making a valid will is vital. An application for a Grant of Probate can be made to the Supreme Court by the named executor of your will quickly and without the need to obtain the agreement of other parties.

If you require assistance with any aspect of your estate planning, please contact the Wills and Estates team at Lavan.

Disclaimer – the information contained in this publication does not constitute legal advice and should not be relied upon as such. You should seek legal advice in relation to any particular matter you may have before relying or acting on this information. The Lavan team are here to assist.