What happens to a company after the death of its owner or managing director

The topic of what happens to a company after the death of its owner or managing director is not a pleasant one, but every entrepreneur would do well to think about it. The sudden and unexpected loss of a key person can paralyse a company completely if it has not prepared for such a situation in advance. In this article, we explain clearly what happens to a company in such a case and how to prevent such situations, at least in part.

The difference between a shareholder and a managing director

At the outset, it is important to distinguish between two roles. A shareholder owns an interest in the company, while the managing director is the statutory representative who runs it. One person can be both at the same time. That is why what happens to a company after the death of its owner or managing director depends above all on the specific role the deceased held in the company.

The death of a shareholder and inheriting the ownership interest

An ownership interest is an asset that forms part of the estate. Whether and how the interest passes to the heirs, however, may also be governed by the memorandum of association itself. That is why it is important to know in advance what rules the company has.

• As a rule, an ownership interest is inherited as property.
• The memorandum of association may regulate or exclude inheritance.
• The heir may become a new shareholder.
• Settlement is handled according to the rules that have been set.

The death of a managing director and running the company

If the managing director dies, the company temporarily loses the statutory representative who can validly act on its behalf towards third parties. This seriously threatens its day-to-day running – from signing contracts and access to bank accounts to communication with the authorities and business partners. If the company has no other managing director appointed, it can find itself in a kind of stalemate in which nobody can act on its behalf. It is therefore essential to appoint a new managing director as soon as possible and to have this change entered in the Commercial Register (ORSR) without delay, so that the company can function fully again.

How to prevent the company from being paralysed

Many problems can be prevented through careful preparation. We recommend considering several measures:

1. Appoint several managing directors in case one of them becomes unavailable.
2. Address the inheritance of the ownership interest in the memorandum of association.
3. Keep company documentation and access credentials stored in a clear, organised way.
4. Set up a succession plan in advance.

The transitional period and obligations

During the period until the inheritance and personnel issues are resolved, the company must still meet its accounting and tax obligations. Neglecting these obligations can make an already difficult situation even more complicated. Always check the current deadlines and procedures against the applicable regulations.

Why orderly accounts matter

In the difficult period after the loss of someone close, having documents in order is an enormous help. If the company has clear and up-to-date accounting, comprehensible contracts and clear access to its accounts, both the heirs and the new managing director can pick up the running of the company much more easily. Conversely, chaos in the paperwork can lead even a viable company into serious trouble.

• Up-to-date and clear company accounting.
• Comprehensible and accessible company contracts.
• An overview of access to accounts and systems.
• Clearly documented payables and receivables.

Why think ahead

Dealing with what happens to a company after the death of its owner or managing director only at a moment of crisis tends to be difficult. Bilvao’s accountants will help you set up your company so that it is prepared for unexpected situations as well and, if needed, will guide you through the transitional period without unnecessary chaos.

Related articles: Register of Public Sector Partners: who it applies to, Transferring an ownership interest in an s.r.o., Mandatory information on an entrepreneur’s website and e-shop.

Frequently asked questions

Is an ownership interest in a limited liability company (s.r.o.) inherited when a shareholder dies?

An ownership interest is an asset that, as a rule, forms part of the estate. The memorandum of association may, however, regulate or even exclude inheritance. That is why it is important to know in advance what rules the company has in this area or, where appropriate, to set them up suitably.

What happens to a company if its only managing director dies?

The company temporarily loses the statutory representative who can act on its behalf, which threatens its day-to-day running. A new managing director must be appointed as soon as possible and the change entered in the Commercial Register. Prevention means appointing several managing directors or having a succession plan prepared in advance.