We believe that protecting you and your business is important which is why we would like to share this article with you. This article was written by Dr Linsday Stoddart.

While it may be a morbid thought, it is important to be prepared for the inevitable. You may have prepared to take care of your family in the event of your death, but what will happen to your small business? If you fail to plan, however, something you spent years building could easily disappear.

What steps and which documents you should have in place will depend on the legal structure of your business. You should also be mindful of three things:

  • Your business succession plan should coordinate closely with your personal estate plan;
  • You must keep both of them up-to-date in order to reflect changes in business, life and law; and
  • This is not a do-it-yourself project. Get some professional help.

Are you doing business as a sole director and shareholder?

The Corporations Act 2001 provides that in the event of the death of a single member and director of a proprietary company, the executor or other personal representative appointed to administer the deceased’s estate may appoint a new director to the company. The director will then have all of the powers, rights, and duties of the deceased director and can keep the company running. Once the company shares are transferred to the deceased’s beneficiaries, they can appoint a new director.

If there is no will, the court may grant Letters of Administration to a family member. That person may then appoint a director, but the risk of delay is substantial and may itself damage an ongoing business. At worst, the company may be deregistered or wound up.

In this situation, the most important document that you must have in place is a valid will that appoints an executor. Supplemental guidance to an executor about the appointment of a director may also be useful.

Are you doing business as a partnership?

Many businesses that begin as sole enterprises eventually become partnerships as the organisation’s need for capital grows. Hopefully, this is done in line with the terms of a formal partnership agreement that spells out what would happen on the death or permanent disability of either partner. There are several possible options. Please contact us for more information about your personal situation.