Continuity planning in the event of incapacity or death

This is a common issue in owner-managed businesses, and the confusion usually comes from advisers mixing together three separate issues:

1. What happens if the owner loses mental capacity?
2. What happens if the owner dies?
3. How does the business continue operating day-to-day while ownership is being sorted out?

The solution is usually not one document but a combination of company governance, LPAs and wills.

The biggest risk is often not actually death. The biggest risk is incapacity.

If you had a stroke, dementia, serious accident or prolonged illness, you may still be alive but unable to:

• Authorise payments
• Access bank accounts
• Sign contracts
• Make business decisions
• Appoint directors

This can cause immediate paralysis.

Scenario 1 – Incapacity (Most Important?) #

A standard personal LPA is often not enough. The solution to also consider is a Business Lasting Power of Attorney where you appoint a trusted person (or persons) specifically to deal with business matters. This could be:

• A senior employee
• A trusted adviser
• Another family member
• A professional executor/trustee

The attorney would be able to the following without waiting for Court of Protection involvement:

• Operate bank accounts
• Sign contracts
• Manage staff
• Continue trading
• Exercise shareholder rights

Without this, the business can become effectively frozen.

Also review bank mandates #

Many businesses assume an attorney can automatically access company bank accounts.

Banks often have their own requirements.

I recommend speaking with the bank and ensure:

• The bank will recognise a registered business LPA.
• Additional authorised signatories can be added if appropriate.

Scenario 2 – Death #

A business LPA ends immediately on death. At that point the Will becomes critical. The shares in the Holding Company would form part of the estate. If the Will simply leaves everything to the beneficiaries then they will inherit the shares and have the responsibility for appointing directors.

If the beneficiaries are unlikely to want this responsibility, then the ownership and management need separating.

Practical Business Continuity Structure #

I would suggest:

Step 1 – Prepare a Will #

The Will should clearly deal with:

• Who becomes responsible for the business.
• Who has authority to sell or wind down the business if necessary.

Step 2 – Appoint Suitable Executors #

The executor is crucial. Instead of relying solely on the beneficaries, consider a professional executor, accountant, solicitor, so that the executor can then:

• Take control of the shares.
• Appoint directors.
• Continue trading.
• Sell the business if appropriate.

Step 3 – Add an Additional Director Now #

This is often the most overlooked solution. If you are the sole director and you lose capacity then nobody can simply step in. Many companies become stuck because there is no valid director capable of acting.

Consider appointing:

• Senior manager.
• Trusted adviser.
• Family member willing to act.

Even a non-shareholding director can ensure continuity. This is often more effective than relying solely on LPAs.

Step 4 – Create a Business Continuity Plan #

Create a document that captures the details relating to :

• Banking arrangements.
• Key suppliers.
• Customer contacts.
• Passwords and systems.
• Insurance information.
• Professional advisers.
• Authority levels.

This should be stored securely and reviewed regularly.

Here’s a checklist of considerations: #

✅ Prepare or update Will.

✅ Put both Personal and Business LPAs in place.

✅ Review banking mandates.

✅ Identify a trusted business attorney.

✅ Appoint a second director who can operate the business if you cannot as the sole director shareholder.

✅ Ensure Articles allow remaining directors to continue acting.

For Death Planning #

✅ Appoint capable executors who understand business assets.

✅ Include clear instructions regarding whether the business should:

• Continue,
• Be sold,
• Or be wound down.

For Practical Continuity produce a written business continuity and succession plan.

The real question for your client is:

“Who do I trust to run the business temporarily if I cannot?”

Once that individual (or individuals) is identified, the legal documents become much easier to design around them.

nb. This is a summary from a personal experience, I recommend taking professional advice and guidance around your own personal circumstances and desired outcomes.