Why a Valid Will is Required
Everyone should have a Will. Regardless of how many or how few assets you may have, a Will ensures that in the event of your death your belongings are distributed as per your wishes.
It is usually quite well known that you should update/amend your Will when significant events take place in your lifetime – such as buying a house, having a child/grandchildren, marriage or divorce. These things are related to your personal life and hence are concerned with your personal belongings and personal relationships and this are usually the most common issues addressed by members of the community when drafting their Will.
Although it is not always as readily considered it is equally, potentially even more important that where business ownership and directorship are involved, the details of your Will reflect your wishes in relation to what should happen with the business aspect of your life.
You may have worked hard for a lot of your life as a sole company director/shareholder, however, if you do not clearly define your intentions for the future of the business upon your passing, this can cause immense emotional and even financial distress for your family, loved ones and business associates. For example, if the sole director or shareholder of a company should pass without a current, valid Will in the short term this can leave the company with no person who is authorised to manage and operate the business.
In ordinary business circumstances if a director or the sole shareholder of a company dies with out a current or valid Will, the surviving directors are able to continue managing the business and may even appoint a temporary person to fill the role/s of the recently deceased.
However, as is the situation with a number of small business entities, where the deceased is both the sole company director and sole shareholder the process can be a little more complicated.
Under the Corporations Act 2001 the executor or other representative who is appointed to manage the deceased’s estate is able to appoint a new director to the company. The newly appointed director has all the rights and responsibilities of the previous director and holds this position until such time the shares of the company are distributed to the beneficiaries. At which point, the new shareholders can choose to keep or replace the appointed director.
This process can, of course, become significantly more complex if the deceased did not have a current Will, or any Will at all, as it will take quite some time and money to appoint an executor for the estate, and then a director for the company, followed by all the required procedures to determine who the entitled beneficiaries.
In the event that there is no Will and these processes take some time to have effect this can be detrimental to the business. With no one authorised to manage and operate the company this could see problems with all areas of the business operations from dealings with banks in relation to company accounts, to negative effects from not being able to pay staff and suppliers. Not only with the business find it hard to trade in the short term, but these circumstances could see the decline of the reputation and value of the company in the eyes of its customers and the community.
The passing of a sole director and shareholder without a Will can also become a problem should someone want to buy the business. If the recognised owner of the shares is not able to authorize documents I relation to the transfer of shares, no sale can take place.
It is important for everyone to have a current and valid Will to ensure that all assets are distributed as per the deceased’s wishes and also to help minimise the time and money loved ones will need to invest in order to see the correct actions taken. As outlined above, this can become even more important when the deceased is both a sole company director and sole shareholder.
The lawyers at The Quinn Group can help you to draft and execute a Will to ensure that your business and personal affairs can be routinely administered in the event of your death. For more information on amending or creating a valid Will contact The Quinn Group on 1300 QUINNS or click here to submit an online enquiry form.