Business Continuity Wills
An often overlooked aspect of a Business Continuity Plan is how a business owner’s Will can affect the surviving owners of a business.
It is important to check that a limited company’s Articles of Association or a Partnership Agreement do not contradict instructions left in the Will and it would be prudent for the Will writer to have sight of any relevant documents prior to drafting the Will.
For the purpose of this article, the term “owner” refers to:
- Sole Traders
- Sole Directors
- Companies with multiple directors
- Persons with significant control
- Any other form of business ownership not listed here
For businesses with more than one owner, the death of one can have a detrimental effect on the survivors and their business.
The question is:
Would your business survive if the bank account was frozen?
What happens to a business bank account if one of the owners dies?
The simple answer is it will be frozen for a period of time. The period of time the account is frozen depends on how well the contents of the deceased’s Will were drafted.
It could be frozen for many months.
When a person dies (whether a business owner or not) the first task of the executor of a Will (or Administrator if no Will is present) is to inform all financial institutions in which the deceased has an interest of the death. At that point, bank accounts are frozen and the only money that can be released is to settle a Funeral Director’s fee.
It is the duty of the executor to either:
- Appoint a new willing owner to take the place of the deceased, or
- Appoint a beneficiary of the Will to take the place of the deceased, or
- Assume the role of the deceased himself.
The executor may take weeks or even months pondering the options and the company’s banking facilities will not be restored until this is resolved.
But what if the appointed replacement is:
- Going through divorce
- Divorced without a clean break agreement
- Sells shares to an undesirable person
The list could go on.
You may have business Lasting Powers of Attorney (LPA) in place and think that will cover your interests, however, powers vested by LPA’s cease at death and the Will takes precedence.
Introducing the Business Continuity Clause.
This clause, when included in the Will stipulates who has the ability to continue the business of the deceased.
This clause is enacted instantly on death and the appointment takes place instantly, thus mitigating the threat of the bank account needing to be frozen.
Simple forward planning, but so often overlooked.
A business continuity will costs £199.00