Mariel Stringer-Fehlow, Bethan Byrne and Mark Keenan of Mishcon de Reya examine the risks companies face when a director or shareholder loses capacity or dies in their article, Succession planning for companies: capacity and continuity. Drawing on the Mental Capacity Act 2005, they outline the legal and operational consequences for businesses and highlight the gaps that often leave companies exposed.
The authors explain that “the incapacity or death of a key director or shareholder can have devastating consequences… potentially paralysing operations” Succession planning for companies capacity and continuity (002).docx, pg. 2. They discuss challenges such as the effect on decision making, the treatment of testamentary shareholdings, Companies House filing requirements and the impact of model articles, noting that article 18(e) was revoked in 2013 and no longer removes directors automatically on mental health grounds Succession planning for companies capacity and continuity (002).docx, pg. 9.
Their guidance emphasises the importance of forward planning, including reviewing articles of association, considering lasting powers of attorney and preparing for both temporary and permanent incapacity.
Read the full Practical Law guide on Succession planning for companies: capacity and continuity.