I have an estate where there the deceased was a (not very successful) accountant.
His practice consisted of two entities. Firstly, self-employment through which the majority of his work was transacted. However, in approximately 1999 he had also incorporated a Limited Company using, we believe, the old table A model articles of association. He also made himself the sole director and sole shareholder. It seems that this was in relation to VAT and the ability to reclaim it.
I understand that a fundamental issue arises under these articles in that the only entity that can change the register of shareholders is a director and only shareholders can change directors without a court order.
The entirety of the company assets are a bank account which contained about £1,500. There are no liabilities of the company which are wholly and exclusively those of the company so these small invoices (for outsourced work) can be treated as expenses of the estate (other than a director’s loan due to the deceased’s estate which can be forgiven if necessary). The bank account has been closed by Barclays when they were notified of the death.
We have obtained the Grant of Probate. There are no STEP provisions or mention of the company in the Will which was extremely simple.
The problem arises in that we cannot work out how to close the company. One person has advised that it is necessary to obtain a court order under s125 Companies Act 2006 at a cost of at least £4,000.
I am yet to find anyone else who has heard of this, let alone one who can tell me that that is a reasonable price. I am also unable to establish if this is a legitimate cost of the estate (rather than the company - which would make it insolvent).
The cited authority for this relates to an intestacy where the appointment of a new director was needed due to an urgency as the company was a functioning business and wages needed to be paid before a grant was obtained. (Kings Court Trust v Lancashire Cleaning Services 2017)
However, a call to Companies House suggested that this was not correct and as we have a Grant then the Executors are able to stand in the same shoes as a Director. The problem, like with a call to HMRC, is that it is not possible to know if the advice received is actually correct.
A colleague of the deceased has managed to change the directors with Companies House, but we do not know if this is a legitimate action or voidable. He has also made themselves Company Secretary.
There must still be lots of small companies incorporated in this way so I am surprised that virtually no one I have spoken to has heard of this situation so I feel that there must some misunderstanding from the discussions I have had, or a simpler way to resolve the issue.
Can anyone provide any guidance as to the best course of action? Can the Company Secretary appoint new Director(s) or does it have to be done by court order? If the latter is the case, then can the estate pay the costs of this?
Thanks in advance
Chris
Hi Chris,
The Table A articles of association provides no provisions to appoint a director when a sole director cannot. The new model articles (2009) provides such a provision, at the time companies where advised to update to the NMA.
I still see many companies who still use Table A today as you have suggested one huge drawback is when a sole director dies or the articles have entrenched provisions. The only way around this issue is to apply to court who will appoint a director to the company.
A colleague of the deceased has managed to change the directors with Companies House. - I’d be careful with this course of action.
I’m not sure why you feel closing the company is so important? If you do nothing - Company house will go through it’s normal compulsory strike off process and do the job for you - which is how the issue you describe is really sorted out.
The court order route would be applicable for a going concern that is being sold or where the assets are considerable and cannot be accessed without appointing a director.
Richard C. Bishop
PFEP
I am not a legal professional, but I can offer some general insights that might help you in your situation. For accurate advice tailored to your specific circumstances, it’s essential to consult with a qualified attorney or legal professional who specializes in company law and estate matters. If the deceased was the sole director and sole shareholder of the limited company, changing these roles could be a critical step in closing the company. Since the deceased left a Will and Grant of Probate has been obtained, it might be possible for the executors to take on the roles of director and shareholder, which could allow them to manage the company’s affairs. If the intention is to close the company, you generally have a few options:
a. Informal Dissolution (using LinkedIn Navigator Extension): If the company has no significant assets or liabilities, you might be able to apply for informal dissolution through a process called “striking off.” This typically involves submitting the appropriate forms to Companies House and waiting for a specific period before the company is struck off the register. However, make sure to consult with a legal professional to ensure this is the correct path for your specific situation.
b. Formal Dissolution (using LinkedIn Navigator Extension): If the company has debts or liabilities, a formal dissolution might not be appropriate. In such cases, you might need to go through a more involved process to wind up the company’s affairs properly.
c. Liquidation (using LinkedIn Navigator Extension): If the company has significant debts or liabilities, you might need to consider liquidation, which involves the appointment of a liquidator to sell the company’s assets and distribute the proceeds to creditors. This can be a more complex and costly process.