By Ray Best, MD of Wills, Tax & Trust Group
If a partner or co-director of a business dies or is incapacitated by illness or accident, it could take as little as 29 Days before the business collapses – a business that you may have spent a lifetime building up.
If the business has not made arrangements for someone to step in and have the legal authority to act on behalf of the owners of the company, what’s going to happen?
It only takes one director or partner to have failed to set up a Lasting Power of Attorney. Then the staff and creditors do not get paid, loans default and rent or mortgages go into arrears. After 28 days, creditors can apply to go to court – and one day later the business could be gone.
The Mental Health (Discrimination) Act 2013 now necessitates that individuals involved in businesses, whether directors, partners or sole traders should have in place Business Lasting Powers of Attorney (Business LPAs).
Under the Act, mentally incapable directors, partners, and business owners are no longer removed if they lack mental capacity, either long term or temporarily. This brings a whole new meaning to the phrase “You don’t have to be crazy to work here, but it helps”!
A lack of knowledge of the new legislation is putting businesses at risk of being left in limbo or going under.
Lasting Powers of Attorney for Business
Thankfully, Business LPAs solve the problem. An LPA is a legal document that enables a selected person, or persons, to act on behalf of a director, partner or sole trader who is mentally or physically unable to do it themselves or to act in the stead of that individual.
People tend to think things like this will never happen to them or they must be old before they suffer a debilitating illness, but businesspeople are no more immune to injury or illness than the rest of us.
I am a former athlete, so naturally over the years I have maintained my fitness. So five years ago, I was shocked to discover that I had cancer. Fortunately, I have made a full recovery since.
Accidents and illnesses that leave people incapacitated or hospitalised for extended periods can strike at any time and any age. Over 22,660 people were seriously injured in road traffic accidents last year and over 13,000 people in England and Wales under retirement age suffer a stroke each year.
Directors and Partners have a duty to act responsibly (s172 (1) & 174 of the Company Act 2006). You may be in breach of this if you did not consider putting a Business LPA in place to cover a possible eventuality that would have a significant detriment on colleagues, staff and business operation.
Allowable taxable expense
The good news is that creating these Business LPAs is an allowable expense, so it would make sense to take advice on this issue and safeguard your business. This is particularly relevant if you are not only a director, but a director owning shares in your own company.
Many business owners have spent a lifetime building up their own business. Therefore to see it all turn to dust, simply for not spending the time to prepare and protect their business must be upsetting, not just for them, but for their employees and family.
Find out more now
We have successfully helped many companies in Berkshire and beyond to protect their businesses, and we can do the same for yours.
For further information on Business LPAs, to answer any queries that you may have and explore ways that we may work together in the future for the benefit of your business, then simply phone 0118 034 7920 or contact our specialist team