There are almost 3 million companies in Australia and many are used by small business to trade and for others, companies act as a trustee for a discretionary family trust or a self managed super fund. However what happens when the director of the company – trading or trustee dies or becomes incapacitated?
Will the business fail?
Will it go into long slow hibernation until Supreme Court legal action is taken to install a director or new trustee?
Will the company be taken advantage of by existing directors?
Will lawyers seeking to make claims against the estate lock up the company or put their favourite director in?
For SMSFs will the ATO install their directors?
Any of the above reasons can spell disaster for a company, trust or SMSF. We have seen cases where a company was run into the ground in a short space of time because there was no director and the accountants and lawyers to the company did not realise that the director’s will is ineffective to appoint a continuing director. For this reason we advise all of our company clients to ensure that a Successor Director is in place.
What is a Successor Director?
The company constitution and rules (not the Will or any enduring power of attorney) may provide for a person known as the Successor Director to take over from a sole director or a director on a Board when the current director is sick, dies or is subject to litigation including divorce or bankruptcy. The current director is automatically removed and the Successor Director appointed.
This is important to do now
If you have a company and don’t have the Successor Director solution in place you are exposed. You can got to a legal firm and get an updated company constitution and binding resolutions for each company which will set you back $1,200 per company or as your accountant, we can provide the Successor Director solution, through our legal tie up with Abbott & Mourly lawyers for only $330 per company. Protect your family’s interests and wealth now.
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