Companies without a constitution: A recipe for estate planning chaos

When a company lacks a formal constitution, it leaves the door open for complications in estate planning. Without clear governance and decision-making processes, disputes between directors, shareholders, and beneficiaries can easily arise, delaying the execution of the estate plan and disrupting the company’s operations.

Here’s what can go wrong without a company constitution:

• Director and shareholder conflicts: Without clear rules, decision-making can stall, leading to internal disputes.

  
  

• Uncertainty in share transfers: When there are no provisions for share transfers upon death or incapacity, legal challenges may follow.

  
  

• Delays in estate execution: Unclear governance can lead to delays in distributing assets to beneficiaries, causing frustration and financial stress.

  
  

• Risk to business operations: Lack of structured processes can destabilise the company during critical transitions.

  
  

Adopting a comprehensive constitution is essential to clarify governance, share transfer processes, and compliance with corporate laws. This helps mitigate risks and protects shareholder and beneficiary interests in estate planning matters.

Encourage your clients to consult legal advisors to develop a tailored constitution that secures their business legacy and ensures smooth estate transitions.

Note: Always consult with a lawyer before making any changes to a unit trust or estate plan to ensure compliance with legal requirements and protect your client’s best interests.

Inherit Australia provides advisers with a structured estate planning facilitation process to ensure that client interests and wishes are maintained as part of their estate plan.