Consider putting in place the Successor Director Solution

ASIC has a warning contained within Info 73 that in the event of the death, incapacity, or bankruptcy of a sole director company that:

“during that period when there is no director, the company may be completely unable to operate. With no one properly authorised to make management decisions or act for the company, it may be unable to trade.”

So what happens when the director of the company – trading or trustee dies or becomes incapacitated?

• Will the business fail?
• Will it go into long slow hibernation until Supreme Court legal action is taken to install a director or new trustee?
• Will lawyers seeking to make claims against the estate lock up the company or put their favourite director in?
• For Self-Managed Superannuation Funds (SMSF) will the Australian Taxation Office install their own directors?

The simplest and quickest solution is to put in place a Successor Director for single director companies and for those companies where family interests are represented in an appointed director.

What is the Successor Director solution?

In short, a company constitution may provide for a person known as the Successor Director to take over from a sole director if the current director is sick, dies, or is subject to litigation including divorce or bankruptcy.

Post upgrade of the constitution and a pre-signed resolution appointing a Successor Director in the event of incapacity, death, or bankruptcy; the company will continue operating and conducting its business. This includes the business of acting as a trustee of a SMSF or trust.
 

 Successor Director Example

John runs his trading company as a sole director. He has 5 staff and is very hands-on but his staff don’t know what to do to keep the business running. He is also the sole director of the trustee company for his family trust and self-managed super fund. John dies in an accident and leaves behind a business, a wife, and two young children. 

John’s family wealth is exposed, as are all of his structures. Who will pay the bills? Will his family be able to access any money – even for the funeral? What happens if the bank mortgage payments can’t be made? The stress and worry for the grieving family is the last thing they need.

But John’s accountant has put in place the Successor Director solution for all his companies and on John’s death, his brother Robert is appointed as Successor Director the next day to keep an orderly transition of the business, the family trust, and the SMSF. Funeral expenses are paid for and ongoing income is paid to the family. 

Next Steps

To put in place the Successor Director solution please click here, to download our form. Please send the completed form to businessservices@saabteece.com.au so SaabTeece can review your current constitution and  send you a proposal.

If you have any questions, please do not hesitate to contact us.