Why Do You Need It?
If you are a company director, in a business partnership, or even a sole trader in the Berkshire area, I recommend you read on!
The Mental Health (Discrimination) Act 2013 has taken out the option to remove a company director on the grounds of mental health problems.
Previously, a director of a company ceased to be a director as soon as a medical practitioner gave a written opinion stating that the individual had become mentally incapable, and would remain so for three or more months. However, on 29 April 2013, the law changed and the Mental Health (Discrimination) Act now allows directors of a company with mental health issues to continue acting in their professional capacity.
It means that if you are a company director or business owner and lose capacity, you cannot be removed as a director by the other directors of the company. This, in effect, makes mental health problems a protected characteristic under the S4 Equality Act 2004. The same rules also apply to partnerships or even sole traders.
The change in law may not be a problem if the mental health issue is mild, but it also allows someone who is very ill, with clouded judgement, to continue running the business which may not be a sensible idea, and have far reaching consequences that result in severe penalties to the company. In these cases, some banks may, under their terms of business, give 28 day's notice, and call in any loans or monies which could leave you and your business in dire operational situations!
It is predicted that 1 in 4 of us under 65 will take time off for mental health problems during our working lifetime. The term mental health covers a wide range of illnesses from long-term dementia to taking time off for a stress-related illness and everything in between.
So, how would your company function without one of its key decision makers? It could have serious implications for your business. It could be business critical!
For example, what if the bank finds out? They could call in any loans or overdrafts! If they think their money is jeopardised in any way, they can ask for it back at the drop of a hat!
Bear in mind that, if your accountant or other financial professional knows about a mental health problem, they have a professional duty of care to notify anyone affected. This would include the banks and financial institutions.
Under the Companies Act, all directors must act in the best interests of the company and have a professional duty to act, at all times, for the benefit of the company. Anyone in breach of the act is open to being personally liable for failing to make adequate provisions, putting business, personal assets, and families, at risk.
In today’s climate, many company directors use personal assets as guarantees against business losses. This might be your house, other valuable assets or, in some instances, even someone else’s house (with their permission).
The solution is a Business Lasting Power of Attorney (LPA). A specific LPA to deal solely with your business affairs. This type of LPA can be used for a number of situations:
· Mental health problems
· Prolonged absence from work e.g. holidays
· Working abroad
· Other illnesses that might incapacitate you
Any of the above factors could rapidly prove disastrous for any business which may spin into terminal decline, simply because no-one is able to take charge of its day-to-day affairs – even if there are people who can do the work that the business delivers, you need someone with the power to run the enterprise.
A Business Lasting Power of Attorney is similar to a personal lasting power of attorney, in that it is a legal document allowing you to give one or more persons the authority to make decisions on your behalf. However, the authority extends only to your business, so you can choose people with the most appropriate set of skills and have a separate set of attorneys to deal with your personal affairs. The appointed business attorneys can then step into your shoes and carry on running the business on your behalf.
The question to ask yourself is this: As a director, is my business protected if I or a fellow director were unable to make decisions?
If you can answer yes, then maybe a Business LPA is not for you. BUT if the answer is NO, or you’re not sure, then you should investigate making a Business LPA to protect you, your business and your family.
In your absence, you nominate someone to make decisions for you. There is a lot of important detail about who you choose e.g. are they qualified? If for whatever reason, you are unable to fulfil your duties at work, your Attorney can make them for you. This gives your business robust provisions that will satisfy important institutions like the banks, that their money is safe.
There are “cases where the donor should have made two LPAs: one for their business affairs and the other for their personal finances.”
It is vital that if you run a business or if you are a company director, you MUST get a Business LPA in place as a matter of urgency.
JON GOULD, Head of Private Client at law firm DWF, comments “A business LPA is essential for a business owner no matter how big the business is. The LPA should be seen as akin to an insurance policy which is there to be used if required. Without an LPA, if the business owner was to become incapacitated, an application would need to be made to the Court of Protection in order for someone to be appointed as Deputy. This is a costly and time-consuming exercise and the business is likely to suffer as a result."
So what do I do now?
Hopefully, you have found this information useful today. The next step is to contact Dave and book a consultation. To contact Dave Patten you can either phone him Free Phone on 0800 847 7045.
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