If You're the Only Director: What Happens to Your BC Company If You Die or Lose Capacity

Plenty of BC companies are run by one person who is the sole director, sole shareholder and the only name on the bank's signing card. That works well until that person dies or can no longer make decisions.

The company does not end, but its decision-making can stop. Bills, payroll, contracts and bank access all depend on someone having authority. A little planning now decides how quickly someone else can step in.

Why one director is a single point of failure

Under the Business Corporations Act (BCA), every company must have at least one director, and the directors manage or supervise the management of the company's business and affairs. With one director, every board decision, from approving a contract to changing bank signing authorities, runs through one person.

Two events take that person out of the picture in very different ways:

• Death. A director ceases to hold office on death, immediately and automatically.
• Loss of capacity. Nothing changes automatically. An individual becomes disqualified only once a court has found them incapable of managing their own affairs, or a certificate of incapability has been issued under the Adult Guardianship Act. A disqualified director must promptly resign.

If you die

When the only director dies, the company has no directors in office. Section 135 of the BCA provides the way forward: shareholders holding more than half the votes in an election of directors can sign a written instrument empowering an individual to call a shareholders' meeting and appoint interim directors, or the voting shareholders can appoint directors by unanimous resolution. The company must then file a notice of change of directors within 15 days.

If you were also the only shareholder, your shares pass to your executor, who exercises the shareholder's rights once the company has evidence of the appointment, in practice often a grant of probate. Until then, there may be a gap with no one able to act for the company. Our article on what happens to company shares when the owner dies covers that process from the executor's side.

If you lose capacity: the harder case

Incapacity creates a gap the BCA does not fill on its own. If you can no longer make decisions but no court finding or certificate exists, you are still the director in law. You cannot sign resolutions, and a written directors' resolution generally needs the consent of each director entitled to vote. The board is effectively frozen.

An enduring power of attorney helps, but only so far. Under the Power of Attorney Act, it can authorize your attorney to make decisions, or do anything you could lawfully do through an agent, in relation to your financial affairs, and it can be drafted to continue despite your incapability. That generally lets your attorney deal with your shares as property. Acting as a director is different. The BCA requires a director to be an individual who is qualified, and the role is generally treated as personal, so your attorney cannot simply sit in your place on the board.

The shareholder route may solve the problem. If you hold the voting shares and your enduring power of attorney is broad enough, your attorney may be able to exercise your votes to remove you as director, which a company can do by special resolution unless its articles allow another method, and then appoint a replacement under the articles or section 135. Whether that works depends on the wording of the power of attorney and the articles, and the attorney must act in your best interests throughout.

Without an enduring power of attorney, your family may need a court application to have someone appointed to manage your affairs, which takes time the business may not have. Our article on estate planning for BC business owners covers the wider plan.

What to put in place now

The aim is that someone you trust can lawfully run the company within days, not months. Consider:

• A second director. Even a trusted family member or business colleague as a second director keeps the board functioning. Directors take on legal duties and some personal liability, so they need to understand the role; see director personal liability in BC.
• An enduring power of attorney that covers your shares. Say expressly that your attorney may vote your shares, sign shareholder resolutions and act on removing and appointing directors.
• A will that gives your executor company powers. Authorize your executor to hold and vote shares and to deal with the company during administration, and think about who should become director.
• Articles that fit the plan. Check how directors are appointed and removed, and whether the existing directors can appoint additional directors, which the BCA allows if the articles provide for it, within limits.
• A corporate power of attorney for specific tasks. A BC company can, in writing, appoint an attorney to sign records on its behalf, generally or for specified matters. This is the company's document, not yours, and it does not replace a director, so check with your lawyer and bank how it would operate if you could not act.
• Banking and records. Review signing authorities with your bank, and keep the minute book, central securities register, articles and key account details where your attorney and executor can find them.

Keep the paperwork current

Planning only works if the company's records match it. Every change of directors must be filed with the registrar within 15 days. A company whose records are out of date, or whose register of shareholders is missing, makes every step after a death or incapacity slower and more expensive.

The only director of your company? Plan for the day you cannot act

Our business lawyers can review your articles, records and director structure, coordinate an enduring power of attorney and will that cover your shares, and appoint additional directors.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.