An unplanned exit

What Could Happen to a Ltd Business If the Owner Dies Suddenly?

Running a small business is demanding, and succession planning often takes a back seat. But what happens if the sole director and shareholder of a limited company dies suddenly—with no preparation in place?

This blog looks at a typical scenario for a UK-registered SME limited company and offers practical steps to protect your business, your estate, and those left behind.

A Common Real-Life Scenario: Trouble Without a Plan

Let’s say “Alan” runs a small construction business—Alan Ltd. It’s a limited company with:

• One director (Alan)

• One shareholder (also Alan)

• Alan is the only person with authority on the business bank account

One day, Alan dies suddenly. Here’s what happens next:

1. The company cannot operate the bank account.

   Banks freeze access once they’re notified of the death. No one else can pay staff, suppliers, or HMRC.

   
   

2. No one can make decisions.

   Without another director or valid provision in the company’s articles of association, no one can appoint a new director.

   
   

3. The business grinds to a halt.

   Clients, creditors, and employees are left in limbo. Projects stop. Reputation suffers.

   
   

4. The estate is delayed.

   Alan’s shares form part of his estate, but probate can take months—especially if there are business assets, property, or no will. Until probate is granted, no one can appoint a new shareholder or director.

   
   

5. Articles of association may not help.

   Many companies rely on the outdated 1985 Table A articles, which may not allow personal representatives (e.g., executors) to appoint a new director. This can trap the business in a deadlock.

How to Avoid This Nightmare

Here are practical steps SME owners should consider asking their advisors about:

1. Update Your Articles of Association

Modern articles (based on the Model Articles for 2006 Companies Act) allow:

• Personal representatives to appoint a new director

• Quorum with one director (if needed)

  
  

  If your company still uses Table A (pre-2009), get your solicitor to review and modernise them. This small investment could be critical in an emergency.

2. Appoint an Additional Director

Even if they don’t play an active role, a second director gives the business continuity. They can:

• Manage the bank account (if authorised)

• Make decisions in your absence

• Appoint further directors if needed

It’s a simple Companies House filing—and a huge safeguard, but they then also have H&S responsibilities as a director.

3. Grant Bank Account Access

Add a trusted co-signatory or second authorised user on the company bank account. This should be someone with enough knowledge and integrity to keep things running if needed.

4. Make a Will That Covers the Business

A will ensures:

• Shares are passed smoothly to the right person(s)

• Your executors have authority to act

• The probate process is more straightforward

You can also consider a shareholder agreement that sets out what happens to shares on death (e.g. automatic transfer or buy-back by the company).

5. Document Key Information

Leave clear guidance about:

• Business contacts

• Contracts in progress

• Employee arrangements

• Software logins and financial records

This can be stored securely and shared only with trusted people or your solicitor.

Pitfalls to Watch Out For

• Old Articles = no mechanism: Table A doesn’t always allow personal reps to step in. Modern articles fix this.

• No will = intestacy: Without a will, your estate follows the intestacy rules. It’s slow and might not reflect your wishes.

• Sole authority = frozen access: If only you control the bank, operations can’t continue.

• No director = legal void: A company must always have at least one director. Without one, Companies House could strike it off eventually.

Conclusion

If you’re the sole director, shareholder, and operator of your company, your business is you. But without the right planning, everything you’ve built can stall—or collapse—overnight.

Think of succession planning as essential business housekeeping. By making a few small changes with the help of a solicitor and your accountant you can make a world of difference for those who may need to carry the torch in your absence.