Farming businesses – how to handle mental or physical incapacity

May 25, 2016
Agricultural law

Advice for farmers on protecting Agricultural Property Relief Advice for farmers on protecting Agricultural Property Relief

The Agriculture, forestry and fishing sector is the riskiest industry sector to work in in the UK, and farming businesses are no exception. Annually there are around 13,000 workers in this sector who are suffering from an illness they believed was caused or made worse by their work.

Agricultural lawyer, Alistair Millar, Partner at Tallents Solicitors in Southwell comments:

Many farms will have thought about and planned for the succession of the farm business when the owner dies, but have they also planned for situations where the owner is incapacitated, either mentally or physically?

Farming is a very hazardous industry. Farmers work daily with potentially dangerous machinery, vehicles, chemicals, livestock, at height or near pits and silos. The high pressures involved in running a successful farming business can also exert a huge mental strain on farm owners.

Alistair continues:

There are several contingency options available to farmers, which may be relevant depending on the type of farming business being operated. Your agricultural solicitor can help you decide on the best plans to make but at the very least, you should have a Financial Lasting Power of Attorney (LPA) in place.

A Financial LPA enables you to appoint an Attorney to look after your business’s financial affairs if you were to become incapable of dealing with them yourself, either mentally or physically. You decide on who will deal with your financial affairs on your behalf and you can place restrictions on and give guidance to your Attorney on how they should deal with your business affairs.

Farms run as companies

Says Alistair:

If the farmer is a director and shareholder, then we recommend that the Company’s Articles of Association and any Shareholder’s Agreements are both closely examined, as they should contain provisions for any situations when dealing with incapacitated Directors. The Financial LPA can give guidance for the Attorney on how they can exercise the farmer’s voting rights.

Farms run in partnership

Alistair continues:

In this situation, we would need to review the Partnership Agreement to review the provisions for handling the mental or physical incapacity of the owner. However, if there isn’t a Partnership Agreement in place, then the Partnership Act 1890 comes into force. With an existing Financial LPA in place, the Attorney can ensure the farmer’s rights and interest in the partnership are upheld in the event of the partnership being dissolved due to mental or physical incapacity.

Farms run by a sole trader

Alistair comments:

It is highly unlikely that, in this situation, there will be any formal documents in place for the business. So it is even more vitally important that the farmer has a Financial LPA in place to ensure that staff wages, loans and mortgages are paid on time, and other issues, such as any taxes due are dealt with promptly.

Why farmers should have Lasting Powers of Attorney

Alistair finishes:

If you were to become incapacitated without a LPA, an application would have to be made to the Court of Protection in order for someone to be appointed as your Deputy. This process can take months and the costs involved are much higher than those involved in obtaining a Lasting Power of Attorney.

And in the meantime, who knows what will happen to the day-to-day running of your farming business?

This is why farms should have well-thought out contingency plans in place for situations where the owner is injured, or suffers from a mental incapacity. Think of it as an insurance policy that could keep your farming business running successfully should the worst happen.

At Tallents Solicitors, we can help your business decide on how to prepare for the potential risks facing you.

Agricultural law financial LPAs for farmers lasting powers of attorney for farmers
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