As an advisor to your clients you may from time to time discuss scenarios with them to ensure that they are considering important issues concerning their business and putting the right mechanisms in place. The following are scenarios we have been asked to offer an opinion. In each case the directors/shareholders wholly own the companies.
Scenario 1: A sole director/shareholder becomes incapacitated. Have the following questions been considered:
- Who is authorised to run their business in their absence?
- Who will pay suppliers, creditors, staff and the shareholders income whilst maintaining confidence in the business so continuation or orderly wind up or sale can occur?
Scenario 2: A husband and wife who are sole directors and shareholders both die suddenly. The shares are bequeathed to their adult children but the children are not interested in running the business. The parents wish is to have a third party to continue administer the business. Has the following question been considered:
- Who will run the business and how might that conflict with the shareholders.
Scenario 3: Husband and Wife are sole directors and shareholders of their business. The wife dies and bequeaths her shares to her husband but the shares are not transferred. The husband then dies and although his shares are bequeathed to their adult child, there is no one authorised to act for the share transfers or to appoint new directors. Have the following questions been considered:
- How can a situation where the wills are placed in probate be prevented?
- Who will manage the transfer of shares in a way that is most beneficial to the business?
These are real life scenarios . A Lasting Powers of Attorney (LPA) agreement, nominating specific powers to agreed parties can ensure such scenarios can be effectively resolved. Agreements can be drawn up allowing for both short term and long term appointment of directors who will continue running the business without interruption, until such time as any issues such as probate are resolved.
So, what is an LPA all about?
As you might know, a lasting power of attorney (LPA) is a way of giving a trusted party the legal authority to make decisions on your client’s behalf if they lack mental capacity at some time in the future or no longer wish to make decisions for themselves. LPAs were introduced in October 2007, replacing the old system of enduring power of attorney (EPA).
It is important to remember that an LPA will only be valid if your client:
- Has the mental capacity to set it up
- Have not been put under any pressure to create it.
To prove this, the LPA must be signed by a certificate provider who confirms that they understand it and haven’t been put under any pressure to sign it. The LPA must also be registered with the Office of the Public Guardian (OPG) before it can be used.
Why are we telling you this?
We know that setting up a valid LPA can be complex and time consuming. It is one of these key documents that can very easily be missed or set up wrongly causing untold problems to your clients’ business if it’s then required.
First Corporate provide a service to address such events. All LPA are drawn up by lawyers and client can feel confident they correctly reflect their wishes. If you feel that this is an area we can help you with, get in touch to find out how easy and cost effective it can be.
This post was written by Adrian Smart