The Mental Capacity Act 2005
How the Mental Capacity Act 2005 can adversely affect your business, and how simple forward planning can mitigate the threat
The Legislation can be read here, however, only sections 2 and 3 are pertinent to this article.
The Mental Capacity Act 2005 (the Act) was set up by Tony Blair’s Government in order to provide care for people who are unable to communicate their needs. This lack of mental capacity could be caused by accident, illness or age and is assessed on a case-by-case basis.
The Act in essence is a positive thing, however, failing to plan can cause problems for business owners if one of their joint directors, partners or person with significant control is deemed to lack mental capacity.
So, let’s look at a common example in a company with multiple directors:
One director has a small stroke and is hospitalised. On the fifth day, a doctor must make a decision about ongoing care. The decision is whether to discharge to home or arrange nursing care.
In most cases, nursing care is seen as the best option and in order to arrange this, the doctor must email his decision to The Court of Protection (the Court); a court set up at the same time as the Act and is responsible for adherence to the Act. The court will in turn contact the local Social Services and delegate the task of arranging care.
That’s all well and good, but the mechanics of organising care poses a serious threat to business.
Social Services (SS) will apply to the Court for Lasting Powers of Attorney over the patient. This is an important step in arranging care.
They apply for two Powers of Attorney. One for Health and Welfare (H&W) and one for Property and Finance (P&F). The second of these is the pertinent one in this scenario. Once the SS have been awarded Power of Attorney, any bank accounts in which the patient is a signatory will be frozen and put under the control of the SS.
The question is:
Could your business survive if the bank account was frozen?
I’m guessing the answer is no, however, with some simple forward-planning, this threat can be mitigated, and that planning is to draw up Lasting Powers of Attorney P&F specifically for a co-director or partner etc to take care of the business finances of the unfortunate patient.
One further thing that is worth a mention. Most company’s Articles of Association (or partnership agreement) allow for the removal of an under performing member, however, this can no longer be done in these circumstances as it is seen as discrimination under the Equality Act 2010 p2. c1. s6. which can be read here.
The costs for arranging this forward planning is just £199.00 per person.