You Have Been Running His Company Since He Died. Are You Liable?

Taking over the family business after the owner dies feels like a formality when everyone in the family already agrees you are the one to do it. Legally, it is not a formality, and the gap between "everyone agrees" and "you are allowed to act" is where people get hurt. Until you have been properly appointed as a director, or a grant of probate has put the estate's authority in your hands, you cannot lawfully sign a contract, move the money, hire, dismiss, or bind the business to anything. Agreement inside the family gives you a moral mandate. It does not give you legal authority, and the bank knows the difference.

This is the authority gap, and almost nobody warns you about it before you walk into it. One day you are the obvious successor, keeping things ticking over so customers are not let down. The next you discover the account is frozen, the supplier wants a signature you are not entitled to give, and the accountant is asking who, precisely, is now running the company. The honest answer, for a while, is: legally, nobody is.

The gap is real whether the business was a limited company or a sole trade, but the shape of it differs, and so does the way out. Understanding which situation you are in is the first practical step, because it tells you where the authority has to come from and how long it is likely to take to arrive.

The short answer: agreement is not authority

Authority to act for a business comes from a legal source, not from consensus. For a company, that source is a valid appointment as a director, made in the way the company's articles require. For a deceased person's estate, it is the grant of representation — probate where there is a will, letters of administration where there is not — which is what confirms that you may deal with the assets at all.

Neither of those is created by the family deciding you are in charge. You can have the unanimous, heartfelt backing of every relative and still have no power to instruct the bank, because the bank does not answer to the family; it answers to whoever can prove they are lawfully entitled to give instructions. This is not the bank being difficult. If it accepted instructions from someone with no authority and the money went the wrong way, it would be answerable for it.

So the useful question is never "does everyone agree I should run it?" It is "what is the legal source of my authority, and is it in place yet?" Until you can name that source, treat yourself as a caretaker, not a decision-maker.

Where the authority actually comes from

If the business was a limited company, the company still exists — death does not end it — but it may have nobody able to act. Directorship is personal and ends at death, so if the deceased was the only director, the board is now empty. New directors are normally appointed by the shareholders under the articles. Where the deceased was the sole shareholder as well as the sole director, most companies using the standard model articles have a specific rescue: the deceased's personal representatives can appoint a director by written notice. That is often the fastest route back to a functioning company, and it depends on the company having those articles rather than older or bespoke ones. The provision itself sits in the Companies (Model Articles) Regulations 2008.

If the business was a sole trade, there is no company and no directorship. The only authority that matters is the authority to deal with the estate, which comes from the grant. Until the personal representatives have that, the business assets — the account, the stock, the debtors — are frozen alongside everything else the deceased owned.

Either way, the practical implication is the same: identify the source, then get it in place as quickly as you reasonably can. If there is no will and authority has to wait for letters of administration, the delay is typically longer, and the order of who may apply is set by the rules rather than chosen by the family.

What you must not do in the gap

The temptation, understandably, is to keep everything moving. Some of that is fine. Some of it is exactly what creates personal exposure. The things to avoid are the things that commit the business or the estate:

• Do not sign contracts in the business's name — new orders, supplier agreements, leases, finance. You cannot bind an entity you are not authorised to represent, and you may end up bound personally instead.
• Do not move or spend the estate's money as if it were yours to direct. A sole trader's business account is the deceased's personal money and is frozen. Paying yourself, or paying bills out of it without authority, can be treated as intermeddling in the estate.
• Do not hire or dismiss staff in a way that purports to bind the business, and do not make promises about their futures you have no power to keep.
• Do not hold yourself out as a director of a company you have not been appointed to. Acting the part can carry the liability of the part, as the next section explains.

None of this means abandoning the business to collapse. It means not taking irreversible, binding steps until you are entitled to. If a genuinely urgent decision cannot wait, that is the moment for a solicitor, not a signature.

The personal risk: de facto and shadow directors

The sharpest trap in the authority gap is that acting like a director can make you one in the eyes of the law, without any of the protection a proper appointment gives. A person who takes director-level decisions and runs the company, though never formally appointed, can be treated as a de facto director. A person who stays in the background but tells the real directors what to do can be a shadow director. Both can owe the same duties as a properly appointed director, and both can carry the same liabilities — including personal liability if the company is insolvent and things go wrong.

That is the cruel edge of it. Step in without authority and you may get none of the certainty of being in charge, but all of the responsibility. Add to that the separate risk of intermeddling in an estate — dealing with a deceased person's assets before you have the grant, which can make you personally accountable to the creditors and beneficiaries — and the picture is clear enough: informal control is the worst of both worlds. The way to hold real authority safely is to get properly appointed or to obtain the grant, not to act as though you already have.

How long the authority gap lasts

There is no single answer, because the timeline is driven mostly by the grant, and grant times vary. Where there is a valid will and a straightforward estate, the wait can be a matter of weeks once the application is submitted. Where there is no will, or the estate is complex, or the application needs correcting, it can stretch to several months. HM Courts and Tribunals Service publishes management information on how long probate applications are taking, and it moves over time, so the realistic planning assumption is "weeks at best, and possibly months," not "any day now."

Source: HM Courts and Tribunals Service, probate management information, published under the Open Government Licence v3.0.

For a company with the model articles and a sole shareholder-director, the written-notice appointment can be much quicker than the full grant, which is exactly why it exists — it lets the company function while the estate is still being sorted out. But even there, a bank or registrar will often want to see the grant before it fully accepts the new director's authority over the account, so the two timelines tend to converge on the grant in the end.

What you can safely do while you wait

The gap is survivable if you treat it as a holding period and document everything. Practical, low-risk steps:

• Keep the business ticking over without binding it. Answer customers, protect the assets, keep the premises secure and insured. Preserving value is different from committing the business to new obligations.
• Keep meticulous records from the date of death. Note every payment in and out, every decision, every conversation. If a later administrator or beneficiary questions what happened in the gap, contemporaneous records are your protection.
• Do not draw more than you can justify. If money must be spent to keep things alive, keep it minimal, necessary and recorded, and take advice on whether it is defensible.
• Get the accounts, passwords and paperwork in order. Much of the friction is simply not being able to find things. Locating the accountant, the bank details, the key contracts and the digital logins early makes the handover far smoother — and accessing the deceased's devices is a task of its own, covered in getting into an iPhone and iCloud after the owner dies.
• Progress the grant, or the appointment, without delay. This is the single most useful thing you can do, because almost everything else is waiting on it.

If you are the one now standing in front of the staff, remember that they are inside the same uncertainty and you have no more authority over their futures than over anything else yet; what you can and cannot say when you tell staff the owner has died is worth reading before those conversations. And if there were two owners rather than one, the dynamics change again, sometimes for the worse — two shareholders with no agreement between them can leave a company deadlocked at the worst possible time. Once things settle, owner-managers usually find the real lesson is about protecting the business against exactly this event, which is where cover built around the person the whole firm depends on comes in; if that is you, you can get life insurance quotes and have an FCA-authorised broker work out what the business and the family would actually need.

Scotland and Northern Ireland

The principle that authority must come from a legal source, not from family agreement, holds everywhere in the UK. The routes differ. In Scotland the grant is called confirmation, and where there is no will the court appoints an executor-dative; the process and its timescales are not identical to England and Wales. In Northern Ireland probate runs through its own court service under rules that diverge in places. The company-law position, including the model-articles appointment route, applies across the UK because company law is largely reserved — so a sole shareholder-director's personal representatives generally have the same written-notice power wherever the company is registered. The safe course is the same in every part of the UK: confirm the source of your authority before you act on it, and until then, keep the business alive without binding it. Our guide to what happens to a business when the owner dies sets out the wider picture.

Frequently asked questions

Can I run my father's company before probate is granted?

Not lawfully as a director, unless you have been appointed one under the articles. You may keep things ticking over with everyone's agreement, but you cannot bind the company, and the bank will not accept your instructions on the account until authority is in place. If the company uses the model articles and your father was the sole shareholder and director, his personal representatives can appoint a director by written notice, which is often the quickest way back to a functioning company.

Am I personally liable if I act without authority?

You can be. Somebody who acts as a director without being formally appointed may still be treated as one and owe the same duties, and a person who deals with estate assets before authority is granted can face personal claims from creditors and beneficiaries. Take advice before signing anything, and if an urgent decision genuinely cannot wait, get a solicitor to make it properly rather than making it yourself.

How do I get authority quickly?

If the company has the model articles and the deceased was the sole shareholder-director, the personal representatives can appoint a director by written notice, which can be much faster than waiting for everything else. Otherwise appointment is made by the shareholders, so the fastest route is usually to progress the grant of representation without delay, since almost everything else — the bank, the contracts, the assets — waits on it.