What happens when a limited company director dies?

When a director of a UK limited company dies, the company does not die with them. A limited company is a separate legal person, so it continues to exist, own its assets and owe its debts. What changes is who runs it and who owns it.

In short:

The directorship ends immediately. Office is vacated on death. No resignation or removal is needed.
Companies House must be told within 14 days using form TM01, and the register of directors updated.
Any shares the director held pass to their estate, not to the other shareholders or directors. The executors or administrators deal with them once they have a grant of probate or letters of administration.
If they were the only director, the company has nobody to run it until a new director is appointed. The shareholders can appoint one. If the deceased was also the only shareholder, the model articles let their personal representatives appoint a director.

The rest of this article explains each point, in the order you are likely to meet it.

The company continues

A limited company exists independently of the people who own and run it. Contracts, bank accounts, employees, leases and tax liabilities all belong to the company, not to the director. The death of a director does not end any of them.

The practical problems come from authority, not existence. Someone needs the legal power to sign for the company, instruct the bank and make decisions. Who that is depends on whether other directors remain.

The directorship ends on death

A person holds office as a director until that office is vacated. Death vacates it automatically. There is nothing for the board or the shareholders to resolve, and the deceased cannot be "removed" in the usual sense because they are no longer in office.

What the board does need to do is record the fact and tell Companies House. The administrative steps are the same as for any director ceasing to hold office.

Checklist for the remaining directors

Minute the vacation of office. Hold a board meeting, or pass a written board resolution, noting the death and the date, and authorising the filings below.
File form TM01 at Companies House within 14 days of the date of death (Companies Act 2006, s. 167). This can be done online through the Companies House service or filing software.
Update the statutory registers. Record the date of cessation in the register of directors and amend the register of directors' residential addresses (ss. 162 and 165).
Tell the bank and amend the bank mandate, particularly if the deceased was an authorised signatory.
Tell the accountants or auditors, HMRC and the company's insurers, including any directors' and officers' liability insurer.
Pay any outstanding fees or salary due up to the date of death to the deceased's personal representatives, and tell HMRC that payments have ceased.
Remove the director's name from headed paper, the website and email signatures if it appears there.
Arrange the return of company property such as laptops, phones, vehicles and keys, with sensitivity to the family.

Check the board can still act

Under the model articles the quorum for a directors' meeting is two unless the directors have fixed a different number. If the death leaves the company with fewer directors than its quorum, the remaining directors may only do two things: appoint further directors, or call a general meeting so the shareholders can appoint them (model articles for private companies, art. 11(3)).

A company that is left with one director can usually still function. The model articles say that where a company has only one director, and nothing in the articles requires more, that director may take decisions alone without regard to the collective decision-making rules (art. 7(2)). Check your own articles, as some require a minimum of two directors.

If the vacancy needs filling, the remaining directors can appoint a replacement by board decision, or the shareholders can do so by ordinary resolution (art. 17(1)). The new director's consent should be obtained in writing and form AP01 filed within 14 days of the appointment.

What happens to the director's shares

Most directors of small companies are also shareholders, so this is usually the bigger question. The answer is that shares do not pass to the surviving directors or shareholders. They form part of the deceased's estate and pass under their will or, if there is no will, under the intestacy rules.

The legal process is called transmission: title passes by operation of law rather than by a voluntary transfer. The person who becomes entitled to the shares in this way is called the transmittee in the model articles.

Who can deal with the shares

Only the deceased's personal representatives have authority to give the company instructions about the shares. Their authority is proved by a grant of representation:

Grant of probate, issued to the executors named in a will.
Letters of administration, issued when there is no valid will or no executor able to act.
Confirmation, the Scottish equivalent, which includes an inventory of the assets the executors may deal with. A company registered in England and Wales can register a Scottish confirmation without further formality.

A grant can take months to obtain. Until it is issued, nothing can happen with the shares, and the company should hold back any dividends due on them. Any dividend mandate the deceased had in place is revoked by their death.

Many companies allow a concessionary procedure for small estates, typically where the whole estate is worth less than £20,000 and the shares less than £5,000, accepting a death certificate and letter of indemnity instead of a full grant. This is at the company's discretion and carries some risk.

What the transmittee can do

Once the personal representatives have produced evidence of their entitlement, the model articles give them a choice (art. 27):

Become the registered holders of the shares themselves. They notify the company in writing, usually by a document called a letter of request, and the company enters their names in the register of members. No stock transfer form is needed.
Have the shares transferred to someone else, typically a beneficiary under the will or a buyer. The personal representatives sign a stock transfer form as transferor. The transfer is treated as if made by the deceased, so any pre-emption rights in the articles or a shareholders' agreement still apply. Most transmissions are exempt from stamp duty and the form should be certified accordingly.

In the meantime the transmittee has the same rights as the deceased holder had, with one important exception. A transmittee cannot attend or vote at a general meeting, or sign a written resolution, until they are entered in the register of members as the holder (art. 27(3)). This matters a great deal if the deceased was the majority shareholder, because for a time the remaining shareholders may be the only ones who can vote.

What the company must record

When the grant is lodged, the company secretary or a director should:

Check that the name on the grant exactly matches the entry in the register of members. If there is doubt, ask the estate's solicitor for a declaration of identity.
Note in the register of members the date of death, the date the grant was registered, and the names and addresses of the personal representatives. Add the word "deceased" after the shareholder's name.
Endorse the share certificate with the same details and return it with the grant to whoever lodged them.
Update the register of people with significant control if the deceased was a PSC, and file the change with Companies House.
Show the eventual transfer on the next confirmation statement. Share transfers are not otherwise notified to Companies House.

Joint shareholdings

Shares held jointly pass to the surviving joint holder automatically. The company needs sight of the death certificate, amends the register of members and either endorses or reissues the certificate. No grant of probate or stock transfer form is required. Check the surviving holder's address, as it may not have been updated for years if correspondence went to the first-named holder.

When the deceased was the only director

This is the situation that causes the most difficulty, and it is common. Every company must have at least one director who is a natural person (s. 155). When a sole director dies, the company has nobody with authority to act. Banks will often freeze the account once they learn of the death, and contracts cannot be signed, staff cannot be paid and filings cannot be made until someone is appointed.

The fix is for the shareholders to appoint a new director by ordinary resolution. Under the model articles any person willing to act may be appointed this way (art. 17(1)(a)). For a private company this can be done by written resolution, which avoids the need to call a meeting. Alternatively, any shareholder may ask the company secretary, if there is one, to convene a general meeting for this purpose.

The catch is the voting rule described above. If the deceased held most of the shares, their estate cannot vote those shares until the personal representatives are registered as holders, which requires a grant. The remaining minority shareholders can pass the resolution in the meantime. In practice the executors and the surviving shareholders usually agree a candidate, often a family member or a trusted adviser, so the business can keep trading.

Once appointed, the new director files form AP01 within 14 days and can then file the TM01 for the deceased, update the registers and deal with the bank.

When the deceased was the only director and only shareholder

Many small companies have one person who is both the sole director and the sole shareholder. On their death there is nobody in office and nobody who can vote.

The model articles for private companies, which apply by default to companies incorporated on or after 1 October 2009 unless they adopted their own, contain a provision for exactly this. Where, as a result of death, the company has no shareholders and no directors, the personal representatives of the last shareholder to have died may appoint a director by notice in writing (art. 17(2)). The appointment takes effect as soon as the notice is given, and it does not wait for the grant of probate, although the company and its bank will want evidence of who the personal representatives are.

Older companies that still use the 1985 Table A articles, or bespoke articles drafted before the model articles existed, often have no such provision. In that case the personal representatives have to wait for the grant, register themselves as shareholders, and then appoint a director by resolution. During that gap the company is in limbo. If the position cannot be resolved, the court has power under s. 306 to order a general meeting, and the Secretary of State has a power under s. 156 to direct how an appointment should be made, but both are slow and expensive routes.

Every company whose shareholders are also its directors should check its articles and, if necessary, add a provision allowing the executors of a deceased shareholder to nominate a director when none remains.

Planning ahead

Most of the problems above are avoidable with a few hours of work while everyone is alive.

Appoint a second director, even one with limited day-to-day involvement, so the board is never empty.
Check the articles for a provision like model article 17(2). If your company was formed before October 2009 or has custom articles, you may need to amend them by special resolution.
Keep the register of members accurate, including addresses for joint holders, so the estate can be dealt with without identity disputes.
Make a will that deals with the shares specifically, and tell the executors where the company's statutory registers and certificates are kept.
Consider a shareholders' agreement where there is more than one shareholder, covering what happens to a deceased member's shares and at what value.
Give the bank a second signatory so payments do not stop while a replacement director is found.

Frequently asked questions

Does the company have to close when a director dies?

No. The company continues as a separate legal entity. It only closes if the shareholders or personal representatives later decide to wind it up or strike it off.

Do I need to tell Companies House?

Yes. File form TM01 within 14 days of the date of death. If a new director is appointed, file form AP01 within 14 days of that appointment.

Do the director's shares go to the other directors?

No. Shares pass to the deceased's estate and are dealt with by their executors or administrators under the will or intestacy rules. The other directors and shareholders have no automatic right to them, although pre-emption rights in the articles may give them first refusal if the shares are sold.

Can the executors vote the shares?

Not until they are registered in the register of members as the holders. Until then they have the other rights of a shareholder, such as the right to dividends, but not the right to attend or vote at general meetings or to sign written resolutions.

How long does it take?

Reporting the death to Companies House and updating the registers can be done within days. Dealing with the shares depends on how quickly a grant of probate or letters of administration is obtained, which often takes several months.

What if the sole director and sole shareholder dies?

If the company has the model articles, the personal representatives can appoint a new director by written notice straight away. If it has older or bespoke articles without that provision, they generally have to wait for the grant, register as shareholders and then appoint a director.

This article is general information about UK company law and procedure. It is not legal advice. The deceased's estate, the company's articles and any shareholders' agreement will affect what applies in a particular case, so take professional advice where the position is unclear.

What happens when a limited company director dies