Indeed, one of the consequences of the coronavirus pandemic is that we have all become that little more adept at crisis planning. But, are we focusing our attention on the most pressing priorities?
In businesses, there’s a danger that we become so focussed on the impact of the “what ifs?” affecting our staff and colleagues that we run the risk of overlooking ourselves.
From the work that I do, I can see that increasing numbers of businesspeople are realising the need to ensure their affairs are in order – but there is some work still to do.
Let’s suppose you are a sole trader or run a small company. If you were suddenly incapacitated by serious illness or injury, who would pay suppliers, manage the bank account, deal with contracts or insurance, file VAT returns or generally keep customers happy?
Taking the relatively straightforward steps to set up a Power of Attorney (PoA) will address these eventualities – and more – while bringing with it security for the people you work with and for.
All too often, people dismiss PoAs as something we need in later life. But to think that is a mistake – one that could have serious consequences.
If your business bank accounts are in your name and you have no PoA in place, no one would be able to take over managing the finances. This could be catastrophic for your credit record, business relationships and reputation, as well as for dependants relying on your income at what’s already a stressful time for them.
Any relative or colleague who wanted to take up the reins would have to apply to the courts for ‘Guardianship’ – a process which can take six months or more. Could your businesses survive such a hiatus?
A simple way to protect against situations like these is to set up a PoA drafted in such a way that it makes specific provision for your business.
How you set up a PoA to protect your business depends on whether you operate as a sole trader or have a company or partnership. Existing partnership agreements or company articles of association may well have provisions for what happens if a partner or director becomes incapacitated, so a PoA must not conflict with these. Advice is therefore important.
Yes, this requires a small investment in time and cost. It’s cheaper, however, to think ahead than have your business paralysed by legal disputes later. In this respect, I like to think of a PoA like an insurance policy - something you hope you never need but you know is necessary.
When it comes to thinking of things we would rather not think about, the same is true for having Wills, as well as pre or post-nuptial agreements in the event of divorce.
Small businesses are the beating heart of Scotland’s economy, many of which have been there for us like never before since the pandemic took hold. We should do all we can to protect them.
Clare McCarroll is a Partner in the Private Client team at Lindsays