Thursday, 12 June 2014
Directors' death warning from legal firm
Graham Davies, senior partner at our head ofice in Telford, said most business people were fully aware of the need to have a will in place to clarify their wishes after their death.
“But a company is a completely separate entity to your personal assets, and so can’t be disposed of through your will. If you die, your company will continue to exist, and it can either carry on or be wound down – any company shares though will count as a personal asset and can of course be passed on through your will.”
Graham said most small companies were run by sole directors, spouses or family members which made it all the more important to leave instructions for how the business should move forward.
“If your spouse or relative hasn’t previously been regularly involved in the day-to-day operation of your company, they could have real difficulties in knowing what to do if the main director dies. Sadly this kind of circumstance happens more often than it should, leaving the company in trouble and the family missing out on valuable income.”
Graham said directors should consider not only a personal will, but some form of company will too.
“This doesn’t need to be complicated – you can simply put together a ‘letter of instruction’ for the executors of your personal will.
“Set out how your company is run on a daily basis, and include the details of the main professional advisers you use. Give details of the company’s current assets and liabilities, and offer advice on who should run the company until all the formalities are completed.
“You do need to bear in mind though that a letter of instruction or any other documents you leave can always be ignored. As the company is separate from your personal assets, your letter is not legally binding so your guidance doesn’t necessarily have to be followed.
“But equally such a letter could prove invaluable at what would be an incredibly stressful time, and although you might think it’s a morbid subject, it’s a sensible step that could save a great deal of difficulty if the worst should happen.”