It is said that a last Will and Testament is undoubtedly one of the most important documents you will sign in your lifetime, however, for many it is often outdated or sometimes even non-existent.
Every will has standard clauses and depending on the client’s needs, lifestyle, occupation, etc. certain specific clauses should be added. For example, a testatrix who has minor children should have a will that identifies the guardian of the children and may include the creation of a testamentary trust to secure their inheritance. Similarly, when it comes to the last will and testament of a business owner, there are additional clauses that should be considered.
When a person dies, the Executor is legal obliged to step into the shoes of the deceased and take control of the assets and responsibilities of the deceased. So, for example, if the business owner was a director in a private company and owned shares in the said company, the Executor has the competency to deal with those shares but cannot act as director unless appointed as such by shareholders. The Executor however can only act as shareholder after being issued with a Letter of Executorship by the Master of the High Court. This can take some time. Naturally, the situation will then arise where a business is ‘director-less’ until the Executor is appointed.
In a 2014 Western Cape High Court judgement, the court said that the only option is to wait for the Letter of Executorship, and for the interim part a curator needed to be appointed to manage the affairs of the business. Although this sounds like a solution, curatorship applications can also be a lengthy and costly legal process.
As a solution one should ensure that the Memorandum of Incorporation of the Company address such situations (where a director dies) and should provide for a person to take over his responsibilities in the interim (while the Letter of Executorship has not yet been issued).
A company should also contemplate having more than one signatory to its bank accounts (e.g., co-director / manager) to enable the business to continue pending the replacement of a director, for example, paying salaries, ordering new stock, paying creditors, etc. It is important to note that a Power of Attorney by a director authorising someone to act in his stead at the date of his death will not suffice because any such Power of Attorney automatically lapses when the person who gave such power dies or becomes mentally incapacitated.
It is also important to remember that the Will of the shareholder needs to give the Executor clear instructions on how to deal with his/her relevant shares in the company. For example: “I instruct my Executor to sell my shares in ABC PTY LTD and to distribute proceeds thereof between my partner and two children.”