15 - 23 Hagley Road
Whether you are a Sole Trader, Director of a private limited company or Partner in a Partnership, have you considered the potentially disastrous consequences should you lose your mental capacity?
How we will your business function? How will it survive? How will you trade, pay suppliers and employees and make day-to-day decisions regarding your business? Have you considered the detrimental effect on your business`s banking facilities? In many cases, when a sole trader, director or partner loses their mental capacity, the bank will simply freeze the business bank account and may even call in, immediately, any debts or loans or the demand the re payment of an overdraft. This could obviously have serious consequences for your business and its survival.
These issues are all too often ignored by business owners. Many assume that their business will “carry on as normal”. Some assume, quite wrongly, that other family members or people within their business would automatically have the legal authority to run the business in the normal way. Sadly, this is not the case.
To make matters worse, The Mental Health Discrimination Act 2013 now makes it illegal to remove a director of a private limited company on the basis of lack of mental capacity. This can create serious problems later on if, say, a director becomes mentally incapable as they cannot be removed. This means that businesses will be stuck with Directors, Partners of business owners who are, due to their lack of mental capacity, are unable to function properly within the business.
Fortunately, there is a solution and the problems referred to above can be avoided by, thinking ahead, and setting up a Business Lasting Power of Attorney.
What is a Business Lasting Power of Attorney?
A Business Lasting Power of Attorney (“BLPA”) is a document that you can set up whereby you name, as your attorney or attorneys, a person (or persons) who you can act on your behalf in managing your business should you become incapable. It is likely that the document would never be needed, but, in the event of illness, accident or the onset mental capacity, the document will allow your chosen attorney to manage and operate your business upon your behalf in the normal way.
A BLPA is quite separate to a Lasting Power of Attorney relating to your personal affairs which many do people set up. A BLPA relates specifically to your business affairs.
To avoid catastrophic problems which are set out above and to ensure the continued survival of your business.
You can choose one or more than one person as your Business Attorney. However, your choice of Attorney is crucial and care should be taken to select the right person (or persons) who has the requisite skills, knowledge and business acumen to act on your behalf in relation to your business. This may not necessarily be a family member depending on the circumstances and the nature of your business. You would obviously need to nominate somebody who you can trust implicitly but also someone who has the requisite skills which may be needed.
Type of business
BLPA`s can be used for any business type or structure whether you are a Sole Trader, a Director of a limited company or a Partner in a Partnership. In some cases, the rules (e.g. Article of Association or Partnership Deed) which relate to your company may not, in their current format, allow a director to delegate his or her authority to a third party such as an Attorney. However, any such restrictions are likely to be discriminatory in light of the current discrimination and equality laws. For the avoidance of doubt, we would usually recommend reviewing your company/partnership rules and if necessary, making some minor amendments, if required, to ensure that in future an Attorney acting under a BLPA could act. The same principle may apply to a Partnership Deed in relation to partnerships
We would recommend that all business owners consider setting up a BLPA. Failure to do so could jeopardise your business and in turn your income.
If you like further advice please contact James Rousell on 01384 371622 or email firstname.lastname@example.org