Trustees' powers re business

Dear forum

If a business is owned and run by a sole director / shareholder:

On their death, in practice what do trustees’ powers to ‘carry on’ business allow the trustees to do, if a another director is not able to be appointed immediately? Can the trustees effectively act as a director?

Any information / views on this would be much appreciated.

Thank you for your time,

Owen Mason
Vermeylen Law

The power doesn’t solve the major issue which is that you need to appoint the executor or a.n.other as a director. You still need to cross the hurdle of how to make the appointment when the registered shareholder is dead. Should be solvable once you have probate but difficult before that. The power does not authorise an executor to hold himself out as an officer of the company when he is not.

The power authorises the executor to run a trade (i.e. where the deceased was trading in person) but is (I believe) just belt and braces; the executor could almost certainly do that anyway.

Andrew Goodman
Osborne Clarke LLP

Hopefully the will incorporated the STEP standard provisions, in which case 4.8 allows the trustees to carry on a trade. A trustee may run the business themselves, become a non-exec or appoint a director to report to him or her.

Iain Cameron
Acer Legal

Dear Andrew

Thank you so much for your time in responding: it is much appreciated.

Best wishes

Owen Mason
Vermeylen Law

Dear Iain,

Thank you very much for taking the time to respond. It is truly appreciated,

Best wishes

Owen Mason
Vermeylen Law

But how does an executor appoint a director (either self or another)? This will obviously depend on the articles of association of the company (which are not affected by the terms of the will) but is likely to be by appointment or election by the members. However an executor of a member is not as such a member. He needs first to lodge a valid share transfer and be registered as a member, but that may well require the approval of the directors, of which there are none.

Clifford Payton
Alpha Court Chambers

Picking up Andrew Goodman’s comments under the Companies Act 2006 the standard position is set out in Article 17(2) of the Model Articles states: “In any case where, as a result of death, the company has no shareholders and no directors, the personal representatives of the last shareholder to have died have the right, by notice in writing to appoint a person to be a director.”

Pre Companies Act 2006, the company articles would need to have been modified to allow personal representatives to appoint a director.

Malcolm Finney