Dominique Brinkmann
30 Sept 2021
OPINION
SUBJECT: Business continuity when sole shareholder and director dies
Main concerns:
What are the consequences if the sole director of a registered company is also the sole shareholder of the same company. This is a concern as in the shareholders of a company nominate and appoint directors (in most cases).
In ordinary sequence of events if the sole director passes away then the shareholder/s will appoint a new director, before the appointment the company will be described as incapacitated.
Again ordinarily the shareholding of a company upon the death of the shareholder will pass to the estate of the deceased and the executor has authority over the assets of the deceased estate.
In this instance if the sole director passes away then the sole shareholder has also passed away then no party has the authority to appoint a new director.
Can the executor of an estate be given the authority to appoint a new director as the estate is the sole shareholder. If so how?
Is there an alternative option to the executor? If so what.
The Law:
If the Memorandum of (“MOI”) of the company states that the executor of a shareholder has voting power as a shareholder then yes the executor can appoint a director. However, this can only take place once the executor is given authority by the Master of the High Court.
Opinion:
Option one: Have the executor appoint a new director. Given the lengthy process that it takes to appoint an executor anywhere from 2 weeks to 3 months after death this is potentially a time consuming option. If this option is elected the MOI of the company will need to be checked in order to ensure that the executor has the authority to do so. It must be born in mind that the company will be considered incapacitated during this period.
Option two: Appoint a second director who can act on behalf of the Company upon the death of the shareholder. This would ensure that the company can continue to operate (with limitations which are dependent on the MOI) until the Executor of the deceased’s estate can exercise the necessary powers.
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