Time to put your business affairs in order
Are you putting off the inevitable?
Most of us have had those jobs on their to-do-list that we know need doing, but for one reason or another they never quite make it high enough up the list to actually get done. Does this sound familiar?
Whilst it may be tempting to let shareholders’ agreements fall into that category, because you ‘trust each other’ and ‘get along’, this may not always be the case. Likewise do you want your fellow shareholders’ shares to pass under their will if they died? Would you want to be working with your fellow shareholders’ spouses or family in that situation? Would you want your fellow shareholders to be able to sell their shares to a third party that you have not approved or do not know? If you have given shares to deserving employees, would you still want them to retain these shares if they ceased to be employed by the company? These are just a few of the areas a shareholders agreement and/or bespoke articles of association would cover in order to give you peace of mind.
If the relationship between shareholders breaks down, it can be very difficult to operate the company in a meaningful way if there isn’t a clear set of binding principles governing the relationship between the shareholders and the operation of the company. A well drafted shareholders’ agreement will help to manage expectations and provide a framework within which the parties can operate especially if consensus is becoming increasingly difficult to reach.
Would your business survive if you were incapacitated?
Many people put in place Wills, and they are told of the benefits of putting in place lasting powers of attorney (LPA) to allow someone to deal with their personal finances and affairs if they are incapacitated due to illness or injury. However, would you want that person to also deal with your business matters? Would that person be the right person to make business decisions and ensure continuity? Whilst the employees may be able to continue to run the business generally, if you are not around they may not be able to enter into contracts, access bank accounts, renew insurance policies or pay salaries.
Who would be a suitable attorney? Unlike an attorney for your personal welfare and health care, you may wish to appoint someone else who is familiar with the business and the industry it operates in. If your business is regulated the attorney may also need to be regulated in order to ensure the business can continue in your absence.
Having a Corporate LPA in place now means someone can make those decisions when you are unable to do so, whereas appointing someone after the event may take months. Would your business survive in that interim period?
If you ask the question is my business protected if something happens to me and the answer is no, then you should consider putting in place a Corporate LPA.