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Warning as ill-prepared businesses are failing to plan

Posted onPosted on 24th Oct

Businesses could be heading for a catastrophic downfall because many are failing to plan what would happen should a business owner be taken ill.

That’s the message from Richard Howard, a partner at law firm Fidler & Pepper Solicitors who specialises in Wills, probate and business powers of attorney.

Richard says he has never come across a company that has had in place business powers of attorney.

He said: “Most businesses plan for the future, strategy, recruitment, finance, all with a view to having a smoothly run, and successful, business.

“But, whilst a health issue for a business owner is something that cannot usually be predicted, it is something that can be prepared for. If a business owner is unavailable for an extended period of time, be it for a couple of months, or indefinitely, what will happen?

“Bank mandates might become invalid. It might be that there is no one who can sign contracts, instruct debt collection, or pay salaries.

“The biggest risk to a business is the bank. If a business owner has a health issue that makes it impossible for them to make decisions for a period of time, it can make the bank very nervous. And that can lead to them asking for repayment of any debts the business may have.”

Richard says people should create a Business Power of Attorney specifically tailored for their business in order to ensure that the people they want to be involved will be involved.

He said: “Business owners can choose people who can make decisions on their behalf while they are incapacitated.

“It might be as simple as appointing the other business owners, or it could be an Accountant, or other adviser.

“It will allow the appointed people to sign documents, communicate with banks, and generally carry out the business owner’s duties on their behalf to make sure the running of the business is not affected.”

Without such a legally-binding agreement in place, to make decisions on behalf of the incapacitated business owner, someone will need to get a court order, which can take around six months.

Richard warned: “If the bank isn’t prepared to wait, it may have disastrous consequences, and could even lead to the closure of a business. Costs for those kinds of court orders typically run into the thousands of pounds.

“Whilst ever the business owner remains incapacitated, the court will also charge annual fees. And if you want to make any significant decisions on behalf of the business owner, the court will require you to apply for another court order – with a further six-month wait, and further costs.”

For more about business powers of attorney, email [email protected] or call 01623 451111.