What happens to a limited company when the sole director and shareholder passes away?
When the sole director and shareholder of a limited company passes away, the company remains active, but cannot legally operate until a new director is appointed. The company requires an appointed director to make decisions and manage business operations.
How is a new director appointed?
The ability to appoint a new director depends on the company’s ‘articles of association’. This a legal document that sets out how a company is run, governed and managed, acting as a rulebook for directors and shareholders.
- Appointment by the executor
Some articles of association allow the executor of the deceased estate to appoint a new director. This is usually the quickest route to appointing a new director. - Appointment by shareholder
If the company’s articles of association don’t give power to the executor, then the person who inherits the shares through probate gains control of the deceased shares. When probate is complete, the new shareholder can appoint a director to take over the running of the company. - Court Intervention
If the article of association is unclear or there is no mechanism in place to appoint a new director, interested parties, such as creditors, employees, or key stakeholders, can apply to the court to resolve the situation.
What happens if no director is appointed?
Without a director, the company is effectively frozen, while still legally existing, it cannot trade or make decisions until a new director is in place. This can lead to several problems for the company and its stakeholders.
- Bank accounts are frozen
Company bank accounts are typically frozen if no director is in place, as banks require an authorised signatory to approve actions. Some banks may allow executors to access accounts if explicitly stated in the articles of association. - Employees may be unpaid
Without full access to bank accounts, employees’ wages can often go unpaid. - Contracts and operations are halted
The company is unable to sign new agreements, fulfil existing contracts or make key business decisions - Creditors can take legal action
If the company is unable to pay its debts, creditors may issue a winding-up petition to have the company forced into compulsory liquidation. - The company can be struck off
If the company remains inactive for too long and fails to file the required account, Companies House may strike it off the register. If the company has debts, however, it’s unlikely the company will be struck off as a notice is placed in the London Gazette, giving creditors the opportunity to object.
What happens if the director signed personal guarantees?
If the previous director of the company signed personal guarantees, they are passed on to the estate of the deceased and are handled through the probate process. These will only crystalise on the deceased estate if the company is insolvent and cannot cover these costs.
What are my options as the new shareholder?
If you, the new shareholder want to close the company or continue its trading operations, the deceased shares must first be passed on through probate. Once probate is granted and the shares are transferred to you the beneficiary of the deceased, you can appoint a new director and begin the process of either continuing to trade, or closing the company.
How we can help your company
We understand that dealing with a company after the passing of a sole shareholder and director can be an extremely challenging and difficult time. We can help you navigate the complexities of either closing a company, or restructuring it to continue its trading. We can offer free, confidential advice tailored to your circumstances during sensitive times.
- Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)
A CVA is a payment plan between a company and its creditors that allows you to restructure your company’s unsecured debts, while continuing to trade, by making affordable monthly payments over a fixed period. We start by assessing your company’s financial position, determining a realistic repayment amount. These terms are then proposed to your creditors and if approved, your company enters the repayment plan. When in place, all interest and charges are dropped and creditors in the arrangement cannot take further legal action. The process lasts for up to 5 years and on successful completion, any remaining unsecured debt in the arrangement is written off.
- Restructure your company through administration
Administration is an insolvency procedure for companies. Entering the procedure, your company will be in a temporary state of protection by a moratorium that halts creditor action, including legal proceedings, giving your company the breathing space to continue trading. We will act as administrator and our primary purpose is to rescue your company as a going concern, attempting to restructure and turn it into a leaner, more profitable organisation. If rescuing the company isn’t a viable option we will also look at the most appropriate exit strategies from administration, whether that be a potential sale of the business, assets, the whole company, or transitioning to an alternative insolvency procedure.
- Close your company down via a Creditors Voluntary Liquidation (CVL)
A CVL is a liquidation procedure for companies that are insolvent. The process will formally close and liquidate your company, ceasing its trading operations, realising any assets, and removing the threat of creditor legal action. If your company has employees, they can claim for redundancy and other statutory entitlements through the government’s Redundancy Payment Service (RPS). The process is final and irreversible. Once completed, your company’s unsecured debt will be written off and the company is dissolved, allowing you, the director, to move on.
- Close your company down and start again via a pre-pack liquidation
A pre-pack liquidation is a type of CVL where the sale of your company’s assets is arranged before liquidation, allowing business operations to continue seamlessly under the purchasing company. The company name may be reused, and employees can transfer under TUPE. Contracts and essential agreements can also be included as part of a sale, ensuring minimal disruption to your business operations. This process eliminates the unsecured debts of your previous company, providing a fresh start free from previous unsecured liabilities.
- Close and liquidate your solvent company via a Members Voluntary Liquidation (MVL)
An MVL is the liquidation and closure of a solvent company. The procedure will formally wind up and close your company, whilst extracting the company’s maximum value, through its various tax benefits. The company’s assets, including any premises, are realised, with the remaining funds distributed to shareholders once creditors are satisfied.
How to get in touch with us: The next steps
- Speak with our initial advisers
Make contact with our team, via phone, filling in a form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation. - Initial assessment
During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems - Formally engage with Wilson Field
If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.
In summary
After a company’s sole director and shareholder passes away, a new director must first be appointed. This process will be dictated on the company’s articles of association. Once the shares have been distributed and a new director is appointed, the company will be in a position to either continue trading or close.
Case Studies
JS Security
Kelly Burton • Other • Administration
All 42 jobs have been saved at a Cheltenham security firm after it was bought out of administration.
Joint administrators Kelly Burton and Lisa Hogg of insolvency and business turnaround specialist Wilson Field were appointed to JS Security on 10 February after HMRC threatened to wind-up the company because of accumulated tax arrears.
The company, which operated from Old Station Drive in Cheltenham, has now been bought out of administration by existing, and associated company, JS Facilities Group Limited of Cheltenham, saving all 42 jobs.
The business will be operated by the existing management team lead by managing director John Search. The total value of the deal is undisclosed but it includes the business and the assets of the Cheltenham based company.
Kelly Burton, director and insolvency practitioner at Wilson Field, which has bases in Leeds and Sheffield, said;
“Unfortunately, the security services sector is very competitive which leads to hourly rate discounting and small margins.
“JS Security accumulated tax arrears which threatened its existence. After discussing the situation with the director, I am pleased that we have found a solution which will see the business continue to trade and also all 42 employees’ jobs transferred to the new company.”
JS Security was appointed the official security provider at Gloucester Rugby in June 2013 for two-years and also won the contract to provide matchday security for the four Rugby World Cup matches at Kingsholm Stadium in September 2015.
The contracts covered match day security, including the hospitality areas, car park security and any additional security requirements.
JS Facilities Group Limited has been running for 15 years and operates throughout Gloucestershire specialising in security services for sectors including commercial, logistics security, construction, events, key holding and alarm response.
Services include remote video monitoring, control room services, lone working monitoring, security guarding, door supervisors, mobile security patrols, event security and first aid training.
Silcox Coach Company
Kelly Burton • Automotive • Company Voluntary Arrangement (CVA)
Pembrokeshire-based Silcox Coach Company, which operates school transport as well as local bus services, has been placed into administration today.
Despite attempts by administrators from Sheffield-based Wilson Field to secure a buyer with various interested parties, the 134-year-old company, which operated a fleet of 65 coaches and buses from its base in Pembroke Dock, has now ceased trading.
Insolvency practitioners Kelly Burton and Joanne Wright from Wilson Field Limited were appointed by shareholders after the company experienced financial difficulties and as a result all 92 staff jobs have been made redundant.
However, in the region of 50 staff have been re-employed by Edwards Coaches of Pontypridd who have been granted the local authority contracts previously operated by Silcox.
Kelly Burton, director and insolvency practitioner at Wilson Field said:
“Silcox Coaches was a fourth generation bus and coach operator and over the years provided various forms of transport services latterly focussing local authority community bus routes, school services, coach hire and coaching holidays.
“The company had an excellent reputation within the industry, the local community and its clients. Initially there were a number of parties interested in buying the business and assets and we had hoped to save all the jobs of the loyal workforce. Sadly, despite our best efforts none of these came to fruition. On the positive side, Edwards Coaches of Pontypridd have re-employed approximately 50 of those staff.”
As well as office accommodation in Pembroke Dock, Silcox also occupied a small travel office in Tenby and a large bus and coach compound near the offices in Pembroke Dock.
Edwards Coaches is the largest family owned coach company in Wales employing over 500 staff and operating 260 vehicles. It currently operates National Express coaches from Haverfordwest departing daily to Cardiff, Heathrow, Gatwick London and various other destinations plus transportation for over 8000 students to school or college each day from bus depots all over South Wales.
It also operates coach holidays for 80,000 passengers a year across the UK and Europe and operates The Edwards’ Red Dragon coach which is the official carrier of the Wales Rugby Team.
Travellers who have booked and pre-paid for a holiday with Silcox may be entitled to a refund and should contact either Bonded Coach Holidays (BCH) e-mail: bch@cpt-uk.org or The Confederation of Passenger Holidays UK (CPT) Tel: 020 7240 3131.
K2 Technologies Ltd and K2 Thermal Imaging Ltd
Kelly Burton • Service Agency • Administration
Wilson Field has helped secure the sale of two related North East businesses, which developed and manufactured thermal imaging equipment, as a going concern to Cenergem Limited backed by a group of local investors not associated with the current management.
Kelly Burton and Joanne Wright from Sheffield-based insolvency specialists Wilson Field were appointed joint administrators of Darlington-based K2 Technologies Ltd and K2 Thermal Imaging Ltd on 25 July 2016.
The two companies had experienced cash flow problems following to a sharp decline in the demand for their products due to increased global competition in the market over the last 18 months.
The sale, which resulted in six of the current eight jobs being saved, was achieved by Wilson Field, working alongside valuers and asset management consultants Charterfields, who handled a number of inquiries and Mark Wilkinson, insolvency partner at Shulmans Solicitors in Leeds.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field said:
“During the past 12 to 18 months K2 had begun to experience increased competition in the market. Competitors had started to manufacture and sell similar products at a lower price, meaning the company had seen a sharp decline in the demand of products and a resultant shortage of cash flow.
“Our job was to realise a sale of K2 as a going concern to achieve the best return for the company’s creditors. There was significant interest by a number of parties. The resultant sale has also saved six of the eight jobs.”
K2 Thermal Imaging Ltd and its predecessors were involved in the development of three products establishing the company as a lead pioneer in thermal imaging.
The company designed and engineered three main product ranges for extensive use in the marine, firefighting and industrial sectors, allowing operators to enter smoke-filled environments to detect and rescue people with a hands-free application, therefore improving success rates in recovery.
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