Would Your Business Survive If You Lost Mental Capacity
Protecting your Business
If you are the owner of a business, whether that be as a Sole Trader, Partner or Director, you may have recognised the importance of obtaining “Key Man” life insurance should you pass away, but have you given consideration as to what would happen to your business if you lost mental capacity?
Mental capacity could decline or be lost due to any number of factors, including illness, brain injury, stroke or as the result of an accident. It is important to note that losing capacity is not just a risk to be associated with the elderly and diseases such as dementia.
Many business people assume that their next of kin would automatically step in or that informal arrangements within the business are sufficient in these circumstances, but this is not the case. There is no automatic legal authority for anyone to take on your role and this could have damaging consequences for your business.
If you were to lose capacity tomorrow, consider your employees – how would they be paid? There may be no authority in place for money to be paid out of the business accounts and so VAT payments, supplier invoices, rent, insurance and other contractual business payments could be left in arrears. In addition, there is unlikely to be an alternative arrangement for signing cheques, accessing bank accounts and completing or authorising ongoing contractual transactions generally.
It’s easy when you know how
Protecting your business in the event of incapacity, whether permanent or temporary, is simple: Make a Lasting Power of Attorney (LPA).
A Lasting Power of Attorney is a document which allows you to appoint a person or people you would trust to manage your property and financial affairs, should you become unable to do so.
The LPA document gives you complete control by allowing you to choose who to appoint and, if more than one person, how they make decisions between them. LPAs can be made to deal with property and financial decisions in your business and also for you personally and so you can make separate documents to run concurrently, with different Attorneys on each, should you see fit.
As well as resolving the issues set out above, an LPA has further practical benefits in that it can be used with your consent whilst you have capacity. This can provide flexibility for extended holidays, business trips, temporary stays in hospital or general absence through illness.
If you lost capacity without an LPA in place, the process that follows can be lengthy, complex and expensive and involves an application to the Court for someone to act on your behalf. At this stage, you would have no control over who applies for this authority and they may be given permission to act for both your personal and business matters.
It is clear to see that a Lasting Power of Attorney is an invaluable and essential protection for any business. Prepared at Tollers by qualified lawyers for a competitive fixed cost, can you afford not to protect your business?
For further information Talk to Tollers’ Trusts and Estates Team today.