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Companies

Having a will as a sole director or sole shareholder

Key points:

  • If the sole director and sole shareholder of a proprietary company dies, the executor or administrator of their estate can appoint a new director. This means someone will be legally authorised to manage the company.
  • This happens most efficiently when the sole director and sole shareholder has a will.
  • If they do not have a will, it could be months after they die before someone is authorised to manage the estate and the company.
  • Without a director, the company may not be able to trade or pay bills.

Why sole directors and sole shareholders need wills

When there is more than one company director, a company can continue to operate if a director dies. The surviving director or directors can continue to manage the company. They may be able to appoint another director, pending confirmation by the company after the appointment. When a sole director dies without a will there is no-one to continue to manage the company or appoint another director.

The company can also continue to operate after the death of a sole shareholder. The directors can continue to manage it until the shares are transferred to the beneficiaries.

If the sole director of a proprietary company who is also the sole shareholder dies without a will, there will be more uncertainty for a longer time. This uncertainty is about whether and how the company can operate, and who the shares should be transferred to as the beneficiaries.

Rules for appointing a director

If the sole director of a proprietary company who is also the sole shareholder of a company dies, the executor or administrator of their estate can appoint a new director. This can be the executor or administrator or someone else.

The new director will be legally authorised to run the company. They will have the same powers and responsibilities that the deceased director had. For example, they will be able to access bank accounts and make decisions about how the company runs.

They can keep the company running until shares are transferred to beneficiaries. The beneficiaries may choose to appoint new directors, or wind up the company.

Without the director, the company may not be able to operate. This is because there won’t be anyone legally authorised to make decisions and manage the company.

For example, the company may not be able to:

  • sell or purchase products and services
  • access the company’s bank accounts
  • pay bills
  • pay employees.

This could create uncertainty and distress for family members, employees and suppliers. It could also reduce the value of the company.

If there is a will

If the sole director and sole shareholder has a valid will, the appointment of the executor can occur more efficiently. This allows a new director to be appointed quickly.

If there is no will

If the sole director and sole shareholder dies without a will, someone (usually a relative) will have to apply to the local Supreme Court for permission to manage the estate and to appoint a new director to the company. This permission is called ‘letters of administration’.

It could take some time, possibly several months, for the Supreme Court to grant the letters of administration.

If there are no relatives or any other obvious people who can manage the estate, the public trustee may be appointed. Waiting for a public trustee to step in to manage the estate could also take several months.

Making a will

To be valid, a will must be:

  • written or typed
  • signed by you or by someone you’ve authorised, who must sign in your presence
  • witnessed by 2 or more adults who are not going to benefit from your will (are not beneficiaries).

We recommend getting legal advice about how to make a valid will.

For more information, see Moneysmart:

Wills and powers of attorney

Relevant legislation

See section 201F of the Corporations Act 2001.