Keily Legal & Wealth are specialist in Business LPA (Lasting Power of Attorney for Business Owners)
Due to two pieces of recent unrelated legislation it is now apparent that there is a new serious issue that affects many businesses in England and Wales.
All Limited Companies, partnerships, sole traders and some charities need to be aware and take the appropriate actions outlined below.
New Legislation
The Mental Health (Discrimination) Act 2013).
The Mental Health (Discrimination) Act 2013 prevents companies and partnerships from removing a director or partner by reason of mental incapacity. Accordingly, a company or partnership could be left with a director or partner who is mentally incapable.
Equality Act 2010
The Equality Act 2010 prevents businesses from discriminating against directors or partners on grounds of disability including mental disability
The Problems – Business owners need to consider what would happen to their businesses if they became ill, had a serious accident or lost mental capacity.
- Who would run the business?
- Would the business be able to continue to operate in your absence?
- There is also the issue of whether the bank would continue funding the business or even freeze the accounts of the business
The Solution – All business owners should have their Business Lasting Power of Attorney in place. This gives one or more persons authority to make decisions on behalf of the Company director / Owner.
So why is this Necessary? – The recent changes to legislation have made it more important than ever to have in place a Business Lasting Power Of Attorney.
- It is used to be the case that if the director of a Limited company became mentally incapable, The model articles would entitle the other directors to remove that director
- This means that the Limited company / Partnership could be left with a director or partner who is mentally incapable of performing their duties
- The Mental Health (Discrimination) Act 2013 has changed the position so that directors and partners can no longer be removed simply because of mental capacity
- Partnership agreements often contain provisions entiliting the other partners to remove a partner who is no longer mentally capable.
What can happen when this advice is Disregarded?
- No one is legally appointed to run your Business / Partnership or undertake your duties as a Director (other Directors cannot simply assume your role and accountabilities) equally nor can partners or relations (in the case of sole traders).
- Banks can and are freezing bank accounts, calling in loans and ceasing overdraft facilities.
- Limited Company / Business Owners / Directors can be held to have not exercised due diligence in not setting up an LPA by others, such as shareholders and ‘sleeping partners’.
- CASE LAW IS GROWING
Is there an Alternative?
- As with personal Lasting Power of Attorneys the only option for your business would be to place it at the mercy of the Court of Protection.
- The Court of Protection would appoint a Deputy (often a professional Deputy) to run the donor’s affairs pertaining to that business, which would not only be costly on an ongoing basis, but often can take months to set up.
- The cost of Deputyship can cost your business anywhere between £5,000 and £8,000 plus ongoing charges.
- This would be an ongoing situation that would probably only cease when the business stopped trading or was sold (if the Deputy agreed to such actions).
- This person could also be a stranger to the business and would have no consideration for other people involved in that business – just the person who has lost capacity.
A Business Lasting Power of Attorney is just as Important and essential as –
- Public Liability Insurance
- Professional Indemnity Insurance
- Keyman Insurance
- One big difference is that this a ‘one off cost’, not something paid / renewed annually
Our Team have Expertise and knowledge of this market which has provided us with a deep understanding of the importance and relevance of providing Lasting Power of Attorneys to a whole new corporate audience. We work with experts in the Financial Planning & Legal sectors. We have business partners that extend to Accountants, Independent Financial Advisors / Companies and Solictiors.
For more information on how to make a Business Lasting Power of Attorney, please contact us on 01277 841 152 or drop us an email