As a business owner, you have invested your time, money, and energy into building a successful business and have likely overcome many obstacles to build and launch your business. You would do anything to protect it from harm.


But have you considered what would happen if the threat to your business was you? What if, you were to become mentally incapacitated due to illness or injury?

This is a serious concern that every business owner should address.

Recent changes in legislation, such as The Mental Capacity Act 2013, have made it almost impossible to remove a company director or partner, who has lost mental capacity.


Removing them based on their impairment, could breach discrimination laws and even the courts are reluctant to take action against this legislation. This could leave a director in a position of authority to make decisions and access company accounts, without the remaining directors being able to do anything about it.


The damage that could be done to your company does not bear thinking about and legal experts suggest that this could lead to an increasing number of cases through the courts, by shareholders suing directors who have not taken their responsibilities seriously.


Every director owes a duty of care to the company and its shareholders, to ensure the smooth running of the business and to do all that is within their power, to prevent their actions from being detrimental. But if the ability to remove that director is now disallowed by equality and discrimination legislation, then what can be done to protect the business?


The answer is simple. Each director should prepare a Business Lasting Power of Attorney (LPA). This is a legal document, authorising someone they trust, to act on their behalf and step into their shoes, should they no longer have the capacity to carry out their duties.


There are various occasions when a Business LPA would be useful. The loss of capacity due to mental illness, is of course a major concern, but there could also be a short-term illness or injury that affects capacity, as well as perhaps trips abroad, which could require someone to deal with matters in their place.


Given the potential risk to directors and their families from being sued by co-directors and shareholders for not having made sufficient provision, it is now vital that everyone who runs a business, has an LPA to allow the named attorneys to deal specifically with their business affairs only.


Although the legislation specifically covers Company Directors, if a case were to come before the courts concerning a Partnership or a Sole Trader, it is likely that the courts would apply the same principles.

At Wills and Estate Planning Legal Services, our trained consultants can assist you in determining the potential risks to your business and advising you on the requirements under the new legislation, in order to protect your interests and your business.


We find it strange, that business owners are more than happy to take out all sorts of insurances to protect their businesses, such as shareholder protection, public liability and indemnity insurance, buildings, and contents, etc.


They then pay the costs for all of them either monthly or annually, on an ongoing basis. Yet setting up a Business LPA is a one-off cost, fully deductible as a business expense. So, unlike all of the above, you only pay once.  Don’t you find that strange as well?


You should view a Business LPA as another form of insurance, of which you hope to never have to call upon, but it’s there in case it is ever needed.

Don’t let the threat of incapacity jeopardise all the hard work you’ve put into building your business. Take action now and set up a Business LPA to protect your interests and ensure the continuity of your business.


Remember, taking action now can help you avoid legal disputes, protect your business interests, and provide peace of mind knowing that your business affairs are well-managed, even if you become incapacitated.


For further details, please email or call on 07878 357781.



Malcolm Harvey.