Pro­tect­ing your busi­ness

Kapi-Mana News - - SCHOOL HOLIDAYS - ALAN KNOWSLEY LE­GAL MAT­TERS

A busi­ness owner who was the sole di­rec­tor of his com­pany passed away sud­denly and with­out a Will, leav­ing his busi­ness with­out any­one to man­age it.

His fam­ily were left to wind up the busi­ness, but had not been in­volved in its run­ning so found this a stress­ful and dif­fi­cult task. If the busi­ness owner had left a Will, he could have in­cluded in­struc­tions for how his busi­ness was to be man­aged af­ter his death.

Many peo­ple have not thought about what hap­pens to their busi­ness when they die. Suc­ces­sion plan­ning is an im­por­tant part of run­ning a busi­ness of any size, but is of­ten over-looked.

It is par­tic­u­larly im­por­tant for peo­ple who have a small busi­ness, such a sole traders or com­pa­nies with only one or two di­rec­tors, where the busi­ness may rely on only one per­son’s knowl­edge, con­tacts and rep­u­ta­tion.

One of the best ways to plan for what hap­pens to your busi­ness af­ter you die is in your Will. You should con­sider whether you want your busi­ness to con­tinue when you are gone, or whether you would want the busi­ness to be wound up, and if so what is to hap­pen to the as­sets of the busi­ness.

You could even set out wishes in your Will about who you want to help your ex­ecu­tor with the wind­ing up of the busi­ness.

If you want your busi­ness to con­tinue when you are gone, you will need to think about who will take over run­ning your busi­ness, es­pe­cially if you are a sole trader or the only di­rec­tor.

This could in­clude doc­u­ments to sit along­side your Will out­lin­ing your plans for the busi­ness and the di­rec­tion you hope it will take in the fu­ture.

Al­though th­ese would not be bind­ing, they could help with ad­min­is­tra­tion of your es­tate.

It is im­por­tant to remember that you can­not leave your role as di­rec­tor to some­one else in your Will.

How­ever your Will can and should pro­vide for the trans­fer of your com­pany shares to an ap­pro­pri­ate per­son, as they will be­come in­volved in the ad­min­is­tra­tion of the busi­ness.

If the busi­ness has a Share­holder Agree­ment in place, any wishes in your Will should be con­sis­tent.

In an­other sit­u­a­tion, a busi­ness owner was left in­ca­pac­i­tated through a ma­jor ac­ci­dent. Be­cause she was still

It is im­por­tant to remember that you can­not leave your role as di­rec­tor to some­one else in yourWill.

alive her Will did not come into ef­fect, but she was un­able to run the busi­ness her­self and it was a tricky and com­plex job to wind the busi­ness up.

You should make pro­vi­sion for how your busi­ness will be man­aged if you be­come in­ca­pac­i­tated. You could ap­point an at­tor­ney to man­age your prop­erty af­fairs through an En­dur­ing Power of At­tor­ney in Re­la­tion to Prop­erty (‘‘EPOA’’).

An EPOA al­lows the At­tor­ney to ex­er­cise any pow­ers you could ex­er­cise your­self while you have le­gal ca­pac­ity, and can con­tinue to have ef­fect if you no longer have the men­tal or phys­i­cal ca­pac­ity to in­struct your At­tor­ney.

The ex­tent of the At­tor­ney’s power can be lim­ited and you can re­voke your At­tor­ney’s power in writ­ing at any time while you are liv­ing. The EPOA will cease to op­er­ate when you die.

Col­umn cour­tesy of RAINEY COLLINS LAWYERS phone 0800 733 484 www.rain­ey­collins.co.nz

If you have a le­gal in­quiry you would like dis­cussed in this col­umn please email Alan on aknowsley@rain­ey­collins.co.nz

Hav­ing a Will de­tail­ing what hap­pens to your busi­ness is im­por­tant.

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