Court enables family to take over deceased director’s company

The High Court has enabled a family to take over the ownership and running of a company after the owner died.

The case involved a cleaning services company in Lancashire. The owner had left the business in his will to his family. After his death, the company continued as a going concern under instructions from family members, but there was no mechanism in the company’s articles of association to add them as members or to appoint a director.

The company had no secretary, and the bank had frozen its account.

The family were consequently unable to pay the company’s employees or HMRC and there was a risk that its business would suffer.

The family had applied for probate, the process of putting a will into action, but it had not yet been granted. This meant they could not become shareholders or appoint directors.

There was therefore some serious concern that the company could cease to function and go out of business while the probate process was carried out.

The family applied for an order under the Companies Act 2006 s.125 to rectify the register and substitute the family members for the deceased as holders of his shares. They would then pass a resolution appointing a director.

The High Court ruled in their favour.

It held that, normally a company would not register executors under s.125 until they were able to prove their title by production of a grant of probate. However, the circumstances in this case were exceptional.

There was no company secretary and given the imminent failure to be able to pay wages to employees and to account for unpaid VAT, it was not appropriate to wait until the grant of probate had been obtained.

Please contact Sarah Liddiard if you would like more information about the issues raised in this article or any aspect of company law.