Friday, December 15, 2017

How to handle mental or physical incapacity

November 30, 2016 by  
Filed under News & Business

It’s not nice to think about it, but farmers should ensure their business runs smoothly even if they can’t do it themselves, says Alistair Millar.

Many farmers hope to hand on their business when they die – but it can be equally important to plan for situations where the business owner is incapacitated, either mentally or physically.

Farming is a very hazardous industry. There are several contingency options available to farmers, which may be relevant depending on the type of farming business being operated. At the very least, you should have a financial Lasting Power of Attorney (LPA) in place.

Financial affairs

This enables you to appoint an attorney to look after your business’s financial affairs if you become incapable of dealing with them yourself. You decide who will deal with your affairs on your behalf and you can restrict how they should deal with them.

If the farm is run as a company, then we recommend that the company’s articles of association and any shareholder agreements are both closely examined, as they should contain provisions for any situations when dealing with incapacitated directors.

Partnership agreement

For farms run in partnership, it is important to review the provisions for handling the mental or physical incapacity of the owner. If there isn’t a partnership agreement in place, then the Partnership Act 1890 comes into force.

With an existing financial LPA in place, the attorney can ensure the farmer’s rights and interest in the partnership are upheld in the event of the partnership being dissolved due to mental or physical incapacity.

When a farm is run by a sole trader, it is highly unlikely that there will be any formal documents in place for the business. So it is even more vitally important that the farmer has a financial LPA in place to ensure that staff wages, loans, mortgages and tax bills are paid on time,

Court of protection

If you were to become incapacitated without a LPA, an application would have to be made to the court of protection for someone to be appointed as your deputy. This process can take months and the costs involved are much higher than those involved in obtaining a lasting power of attorney.

This is why farms should have well-thought out contingency plans in place for situations where the owner is injured, or suffers from a mental incapacity. Think of it as an insurance policy that could keep your farming business running successfully should the worst happen.

Alistair Millar is a partner at Tallents Solicitors, Southwell, Nottinghamshire. For details, call 01636 813411 or visit www.tallents.co.uk 

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