As a business owner in a limited company, have you thought of the importance of taking your share of the business into account when writing your Will?
One of the most important parts of business planning is stating how you wish the business to be administered in the event of death, by making a Will. If you die without making a Will (intestate) your family could be involved in a lengthy procedure to be able to access the equity in the business, and all of this at a time when they will probably need it most.
Dying intestate means that your business will be administered according to the appropriate UK intestacy laws, rather than how you may have envisaged. For example, without a Will, your share of the business will be sold by the Administrator appointed by the court under intestacy rules. At worst, this could be someone you have no wish to see dealing with your estate. Or, it could be that the Administrator simply does not have the experience, contacts or knowledge to realise the maximum value of your share of the business.
Through a professionally written Will you can nominate the Executor yourself; someone whom you know and trust, and who can value your business accurately and distribute it effectively, according to the terms of your Will. You can also use your Will to ensure that your beneficiaries are able to use other assets in your estate to support the business and allow it to carry on trading. This could remove the pressure for a quick sale and help them get a better price for it in the future.
There are specific considerations to bear in mind if you have a limited company. If you are a sole director but there are other shareholders, the remaining shareholders would be able to appoint a director and take steps to wind up the company. If you are the only shareholder in the company, the Executor would need to arrange matters.
Business Lasting Power of Attorney
Business Lasting Powers of Attorney (LPAs) allow you to nominate a person of your choosing to make decisions on your behalf if you are no longer able to do so yourself. Your attorney can access accounts, make payments and deal with the day-to-day running of your share of the business.
If there is no business LPA in place, certain risks arise. For instance, if one of the bank account signatories lacks capacity, the bank can freeze the account to protect the vulnerable adult. Contracts entered into by a person who had capacity, but now lacks it, may become unenforceable owing to their incapacity. Paying creditors, employees or tax becomes difficult, as does running the business generally with a businessperson who now lacks capacity. Investors may require their investments to be returned. By appointing a business LPA, these issues may not arise.
Setting up an LPA is a straightforward and relatively quick process, but the benefits can be invaluable.