Many people operate a company with only one director, which is quite legal and normal. Often the spouse is not a director, which has the benefit of asset protection.
But what happens in the event of death, incapacity, or bankruptcy of a sole director company?
The company may not be able to operate as no one is authorised to make decisions or to act for it. Banks and lenders may freeze the bank account as no person is properly authorised to act for it. Staff and suppliers can’t be paid, harming the reputation and value of the estate. A prospective purchaser of the business has to deal with the estate, which may roll on for an extended period, and there may be nothing left by then anyway. Consider the stress and worry for the grieving family.
The situation is the same for trading and investment companies, and company trustees for family trusts and SMSFs. A Will is ineffective for the appointment of a continuing director.
Successor Director as a Solution
The company constitution may allow a Successor Director to take over from a sole director, or even when the current director is sick, dies, or is subject to litigation including divorce or bankruptcy.
An “Alternate Director” will not succeed as that appointment ceases on the death of the current director.
Proceeding with a Successor Director
The constitution needs to be checked, some allow for this, but if not, upgrade the company constitution (not the trust or SMSF)
Then, prepare a binding resolution signed by the current director which will automatically install the Successor Director in the event of the possible and even other events
No notice is required to be given to ASIC as the Successor Director is not being appointed now but possibly in the future.
For checking the Constitution, upgrading the Constitution to allow a Successor Director, preparing the minutes and resolutions, attending to the secretarial records, and a meeting for signing the documents, allow $420 to $580.
You’ve done everything you can to protect your assets and family, it is such a simple solution to a highly possible risk. It can’t be done in a will.