K died suddenly in April 2016. K was a medical specialist and was the sole director and shareholder of a company which conducted his practice.
Shortly before his death he left a note described as his “last will and testimony” specifying that his partner T should be the executor of his will and that his estate should be divided equally between T and two of his children. T argued that this document is an informal will and makes an application for probate of that informal will.
As we have posted before if a company has a sole shareholder who dies leaving a will, the directors can continue to manage the company until the shares are transferred to the beneficiaries of the estate.
However if the sole director is also the sole shareholder, and dies without a valid will it creates difficulty for the management of a company. Where there is no will a person needs to apply to the Supreme Court for letters of administration to manage the estate which may take months.
T sought an urgent although limited grant of administration for the protection of the assets of the estate.
The company is the principal asset of the estate, T gave evidence that it is necessary for the practices to be sold as quickly as possible, to preserve their value to an incoming ophthalmic surgeon. Therefore it is necessary for the shares in the company to be transferred to her, in order that she can appoint directors to manage the company’s affairs, run and ultimately sell the practices (and the shares in the company).
K was the sole shareholder and director of the company. Therefore unless the court grants of administration, there is no one presently entitled to run the company.
A company that has no one properly authorised to act for it may be unable to trade. It may be difficult to operate bank accounts with the likelihood that the value of the business (an important estate asset) will be impaired. Equally if the business is to be sold for the benefit of the estate its value may erode if it cannot be sold quickly.
The Court decided in the interests of beneficiaries and the creditors of K’s estate that someone be appointed to protect the estate’s assets. The court accepted T’s argument that the substantial assets of the estate must be protected. Even if they are sold as something like their estimated value, the estate will be insolvent unless the proceeds of the superannuation fund or the life policy are substantial.