For entrepreneurs who still need to make changes to their articles of association before the end of 2023,
it is recommended to think about a succession scenario in case they become (temporarily) incapacitated or go missing, in addition to the mostly purely terminological changes.
Consider the following scenario: you are sole director of your Ltd or public limited company and you exercise the membership rights (“titre”) of more than half of the shares.
In the case you become incapable, your company is directionless. After all, there are no other directors to take the helm and the general meeting cannot quickly appoint a new director either, given your majority shareholder position. As a result, contracts cannot be validly concluded from then on, payments cannot be (validly) made and certain decisions cannot be validly taken and executed.
If you have not taken any prior measures, your family will be able to unblock the company through a legal procedure before the justice of the peace by appointing an administrator who will then temporarily do the honours as helmsman and take charge of the company. However, as long as the administrator is not on board, the company will remain rudderless.
In this hypothesis, a healthcare proxy seems a sensible preventive measure to cope with the possible (steering) failure in your company. But a healthcare proxy also has its limitations.
For entrepreneurs who are sole directors and majority shareholders in a family-owned company, and certainly for those operating under the form of a public limited company, it is therefore advisable to provide for a well-considered succession scenario in the articles of association, in addition to drafting a care proxy.
A common approach is to provide your partner or trustee (for a limited period or not) as the next director in the event of your ‘stepping down’, followed by (one of) your children, and so on.
Clearly defining and enshrining in the articles of association the term ‘step down’ or ‘defunct’ is crucial in this regard. This term, often used in the context of a foundation, can be interpreted more broadly than just ‘becoming incapacitated’, as in the case of a healthcare proxy. Stepping down can also refer to situations where you are temporarily out of contention, missing, absent for more than 3 months, dying, and so on.
By proactively incorporating a succession scenario in your company’s articles of association, you prevent your company from becoming (dis)controlled during your (temporary) absence. Especially in family-owned companies with a parent as sole director, this can make sense.
Compare it to a captain handing over the helm of the ship to an able helmsman during his absence.