A successful business needs to plan for every eventuality, and while it is difficult to think about losing a key member of the company, unexpected illness or death needs to be factored into any business plans.

For a company, the death of a director has serious implications. Along with the effect on staff and customers of a bereavement, a company director has responsibilities, and company affairs still need to be carried out after they have passed away.

We take a look at measures companies need to take to minimise disruption in the event of a death, along with the legal necessities and support a company will need to attend to.

Different situations

While the actions that need to be taken following a death will be dependent on the rules and requirements set out in the company’s articles of association, there are some general rules that apply. 

Sole director: When a sole director dies and there are surviving shareholders or members, they can hold a shareholders meeting to appoint a new director. 

Surviving directors: The remaining directors can continue to run the company (if the company’s articles of association allow this) and share out the responsibilities of the deceased officer. 

Sole shareholder: If the deceased director is the only shareholder, and the company has been incorporated under the Companies Act 2006, the model articles of association allow the personal representatives of the deceased officer to appoint a new director. 

The transfer of shares may be dependent on the deceased director’s will, or in accordance with a shareholders’ agreement or company articles if no will exists. 

Legal obligations

By law, a company must tell Companies House about any changes to directors’ details within 14 days (if registered). This includes when a person is no longer a director because they’ve resigned, retired, or passed away. 

The easiest way to tell Companies House about changes to your company directors is online, using the company’s authentication code. But you can also send a paper form TM01. 

The appointment of a new director will need to be ratified at a general meeting and Companies House will need to be notified of this change through form APO1, which can also be completed online. 

Public limited companies (PLCs) are legally required to have at least two directors at all times, so if one of the two directors dies, shareholders must appoint a second director as soon as possible.

Supporting bereaved family members

Company affairs such as filing accounts on time still need to be carried out after a director has passed away. But bereaved family members might not always know what’s expected of them until they receive a letter from Companies House with a call to action and a deadline.

Companies House is fully aware of how stressful a bereaved family member may find it to get in touch, particularly if they have little knowledge about the company. In fact, customer service staff at Companies House, now receive training that directly relates to providing more tailored support for bereaved customers.

“The advice for individual companies will vary depending on the company’s situation and circumstances. But we’ll be making sure that advice is tailored to each company and that the timescales within which they’re expected to comply are reasonable,” the Companies House website states.

Who needs to be notified?

There is a whole list of individuals, businesses and bodies that will need to be informed of a bereavement, and these will be different for every company.  

As a guideline, these will usually include: company members, employees, company accountant, suppliers, banks and other lenders, HMRC, commercial landlords, clients and customers, and business associates. 

As well as sending out personal notifications, you may also wish to prepare a press release to share with local or national media, or to add to your company website, to make sure that you have informed any interested parties. 

How can you prepare?

To minimise disruption to the company at such a difficult time, and avoid unnecessary internal squabbling or a power struggle after a director has passed away, the company’s articles of association should clearly lay out the process of what needs to happen next. This should be updated regularly as the business evolves, particularly if there are changes to the management structure that need to be considered. 

Directors may also want to formally document their wishes for what should happen to the company in the event of their death.

How can we help?

While general advance preparations can be made to handle the unexpected death of a company director, the shock and stress to remaining company members and the range of challenges that result can make it difficult to return to ‘business as usual’. 

Seeking legal advice may be advisable, and to minimise the impact in the short-term, it may be necessary to bring in outside help, such as secretarial or corporate services, to enable companies to focus on their core responsibilities. 

If you’d like to find out more about how we can help your company during a difficult time, our experts are on hand to answer your questions. Just request a call back.