Richard Marshall, associate solicitor at Hay & Kilner, is calling on business owners to protect their businesses should the worst happen
When running a business, a large proportion – if not all – of your time revolves around your enterprise. From rapidly growing start-ups to established family-run businesses, long working days pass into months, which can roll into years in the pursuit of making the business a success.
It’s no surprise then that planning for those ‘worst case scenarios’ is not at the top of the ‘to do’ list.
But having worked so hard to create and establish a successful business, it is important to take the time to consider what would happen to all of that hard work and success if a personal catastrophe arose – such as the loss of mental capacity or death.
According to Legal and General’s recent State of the Nation’s SMEs report, where 800 SME owners were surveyed, over half did not include any provisions in their wills for the future of their business, or have any specific arrangements in place for dealing with their shareholdings or business assets (such as Shareholder Agreements).
Given the busy nature of running an SME, many had not reviewed governing documents such as the company’s Articles of Association or their Partnership Agreement since the business began.
Should the worst happen, and a business owner died without adequate planning in place, this could cause major problems for the future of the business. For example, uncertainty would arise in relation to whom the deceased’s shareholding would pass. Could the company buy back the shares? How would this be financed? And could the business continue to exist?
A lack of adequate planning could also result in family members and loved ones being left in a financially vulnerable position, with the wealth accumulated within a successful business being inaccessible, eroded or lost after so many years of hard work.
If a Property and Financial Affairs Lasting Power of Attorney was not in place and a business owner was to lose mental capacity, it may not be possible to access business accounts, fulfil contacts and, ultimately, manage the business.
The same is also true from a personal perspective. Without a Lasting Power of Attorney, it may not be possible to take earnings out of the business, which could in turn prevent the business owner from obtaining much-needed care or result in their family being left in financial hardship.
When considering a Property and Financial Affairs Lasting Power of Attorney, it is important to ensure that the correct people are appointed to act as attorneys, so that they are adequately placed to deal with the business. This may mean having one Lasting Power of Attorney to deal with business assets, and another to deal with personal finances to ensure that the business, the incapacitated owner and their family are properly cared for.
At Hay & Kilner, our specialist solicitors in our private client and commercial teams work closely with business owners, directors and shareholders to provide advice and planning through wills, shareholder and cross option agreements and Lasting Powers of Attorneys to ensure that, should death or incapacity occur, the business can continue, and the families and loved ones of those involved in the business will be provided for.