How to prepare for the death of a director

It’s prudent to put in place appropriate measures and straightforward procedures

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The untimely death of a sole shareholder/director of a private limited company can bring business to a standstill and put considerable pressure on the deceased’s personal representatives.

When a sole director dies – and if there are surviving shareholders or members –  they can hold a shareholders’ meeting to appoint a new director.

If the deceased director is the only shareholder, and the company has been incorporated under the Companies Act 2006, the model articles of association allow the personal representatives of the deceased officer to appoint a new director.

However, there may be a significant period of time between the death of the sole shareholder/director, and the formal appointment of the personal representatives. A more robust approach worth considering, is to incorporate appropriate alternative director provisions into a company’s articles of association.

The appointment of the new director does not mean that the engagement that the company has with the accountancy firm will come to an end. However, the accountant is required to comply with customer due diligence and carry out the necessary checks in accordance with the Anti-Money Laundering Guidance For the Accountancy Sector. It is also advisable to review and reissue a new engagement letter, to avoid disputes over accountancy services provided and/or fees charged.

How to tell Companies House

By law, a company must inform Companies House about any changes to directors’ details within 14 days. This includes when a person is no longer a director because they have resigned, retired, or sadly passed away.

The easiest way is to do it online, using the company’s authentication code. But you can also send a paper form TM01.

As the company’s deadline for submission of accounts and corporation tax will stay the same, if extra time is required to prepare and file the accounts, the new appointed director can apply to extend the accounts filing deadline. The application for extension should be before the filing deadline. Further guidance is available.

Late filing penalties

If the company has missed the filing deadline, it might be possible to appeal the penalty on the ground of ‘reasonable excuse’. HMRC guidance states that ‘A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet – for example your partner or another close relative died shortly before the tax return or payment deadline’.

Tell Us Once

Tell Us Once is a service that lets you report a death to most government organisations in one go. Tell Us Once will notify:

  • HMRC: to deal with personal tax and to cancel benefits and credits, for example child benefit and tax credits, but you need to contact HMRC separately for business taxes, like VAT
  • Department for Work and Pensions (DWP): to cancel benefits and entitlements, for example universal credit or state pension
  • Passport Office: to cancel a British passport
  • DVLA: to cancel a licence, remove the person as the keeper of up to five vehicles and end the vehicle tax (you must contact DVLA separately if you either sell the vehicle or keep it and tax it in your own name)
  • local council: to cancel housing benefit, council tax reduction (sometimes called council tax support), a blue badge, to inform council housing services and remove the person from the electoral register
  • Veterans UK: to cancel or update armed forces compensation scheme payments
  • Social Security Scotland: to cancel benefits and entitlements from the Scottish government, for example Scottish child payment.

Tell Us Once will also contact some public sector pension schemes so that they cancel future pension payments. They’ll notify:

  • Civil Service Pension Scheme
  • NHS Pensions for NHS staff in England and Wales
  • Armed Forces Pension Scheme
  • Scottish Public Pension Agency schemes for NHS staff, teachers, police and firefighters in Scotland
  • participating Local Government Pension Schemes

There’s a different process to update property records if the person who died owns land or property.

Planning for unexpected death is often low on the priority list for many business owners. However, to minimise the burden on those left behind, and avoid potentially serious implications for the company itself, it is important to put in place appropriate measures and straightforward procedures for dealing with the death of a company director.