Williams & Ors v Russell Price Farm Services Ltd

Where a deceased sole shareholder’s executors cannot obtain probate before serious and urgent prejudice will result to the company, the court may rectify the register under section 125 of the Companies Act 2006. The relevant question is whether there is unnecessary delay in entering the fact that the deceased ceased to be a member, assessed in all the circumstances. The ordinary expectation that registration awaits probate is not absolute. In an exceptional case, rectification may be ordered before probate, particularly where the company otherwise lacks an effective director. The court may protect against the risk that probate will not be pursued or obtained by requiring the executors to undertake to seek probate promptly and to pay the necessary taxes.

The claimants were the executors of the will of the deceased, who had been the defendant company’s sole shareholder and director. On his death, his shares passed by operation of law to the executors, but they could not exercise membership rights because they were not yet entered in the register and probate had not been obtained.

The company had no director, its bank account was effectively frozen, and it faced urgent obligations to creditors and customers. The claimants applied under section 125 of the Companies Act 2006 for rectification of the register. The court had already made the order and gave written reasons for doing so.

1. Order and jurisdiction. The claim for rectification was granted. The court held that the exceptional urgency created an “unnecessary delay” within section 125(1)(b) of the Companies Act 2006. That opened the jurisdictional gateway for rectification before probate had been applied for or obtained.
2. Ordinary rule and exception. Ordinarily, a company is entitled to await a grant of probate before registering executors. The court applied the reasoning in Kings Court Trust Ltd v Lancashire Cleaning Services Ltd [2017] EWHC 1094 (Ch), where exceptional circumstances justified earlier registration. The relevant question was whether sufficient cause existed for omitting the deceased from the register and whether unnecessary delay was occurring, having regard to all the circumstances.
3. Executors’ title. The court relied on Goodman v Goodman [2014] Ch 186 for the principle that an executor derives title from the will and that the deceased’s property vests in the executor on death. The subsequent grant of probate relates back to death.
4. Safeguard. Because the executors had not yet applied for probate, the court required undertakings that they would not renounce probate, would apply as soon as possible using reasonable efforts to obtain the necessary information, and would pay all necessary taxes so that probate could issue. An undertaking limited to payment from the estate was insufficient because it would leave the risk of delay with the court rather than the executors.
5. The rectification order was made on 7 April 2020, with the reasons given in this judgment.