Most owners of small and medium sized enterprises (SMEs) pay close attention to their business strategy, succession plan, and exit strategies for retirement.
However, one issue which the vast majority of owners tend to overlook is what would happen to their business if they were to suffer from mental health problems which prevented them dealing with the day-to-day running of their business?
Where the SME trades through the vehicle of a Limited Company then it used to be the case, under the model articles of the company, that a person’s directorship of the company would automatically terminate if they were to suffer from mental health problems – the Mental Health (discrimination) Act 2013 removed this automatic termination provision so that now where a Director of a Limited Company suffers from mental health problems, they will be able to remain a Director of that company. The Equality Act 2010 means that partnerships and sole traders are to be treated similarly.
Given that there is no longer an automatic provision to remove key figures in the business who are suffering from mental health problems, this could lead to problems for the business from an administrative and decision making point of view if the unwell individual does not have a Lasting Power of Attorney in place under which the Attorneys can take over the functions required by the business.
At the top of the potential problems pile may be the position with the bank. Many standard overdraft facilities between businesses and their banks include a provision that the bank may withdraw its facilities after 28 days once receiving a notice of incapacity of the Director or other appropriate person – clearly that could prove disastrous for the business both in the short and longer term.
Similarly, if the person who is suffering from mental health problems carries out a job which is regulated, then the Attorneys will also need to be suitability qualified and regulated themselves.
It may be that you already have a Lasting Power of attorney in respect of your personal property and financial affairs. If so, it is worth asking yourself whether or not the Attorney (or Attorneys) appointed under that document are the appropriate people to make business decisions on your behalf?
Do they have the necessary skills to continue the business if you are incapable of doing that yourself? Do they have the necessary qualifications if your job requires you to be regulated?
In many situations we find that owners of SMEs like to appoint Attorneys with a different set of skills for their business affairs and their personal affairs. It is possible to have more than one property and finances Lasting Power of Attorney and indeed some clients who hold multiple Directorships will have a Lasting Power of Attorney for each of those.
Our team at Bell & Buxton can provide confidential advice on all aspects of the law for company and business owners.