What Happens to Your Business If You Can’t Run It?

October 19, 2026

Most business owners plan carefully for growth. They forecast, recruit, invest and set targets for the year ahead. Far fewer plan for what happens if illness, an accident or a sudden loss of mental capacity means they can no longer make decisions for their business.

For owner-managed businesses, two legal documents do much of the heavy lifting: a Business Lasting Power of Attorney (Business LPA) and a Shareholder Agreement. Together, they help your business keep trading, pay people, and make decisions, even when you cannot.

This risk is relevant if you own an SME, are a member of the board of a family business, have shares in a private limited company or have just set up a start-up. In this article we explain what a Business LPA is, how it differs from a personal LPA, what a shareholder agreement covers and the main clauses that every such agreement should have. The private client and corporate teams at Tayntons Solicitors collaborate in giving advice to businesses in Gloucester and Gloucestershire on this matter.

Why “What If” Planning Matters for SMEs

Most people regard business continuity planning as being about succession or Wills. The greatest risk, though, lies in the period between the owner losing the ability to act and someone else having the legal power to act on their behalf.

The fact that someone has lost their capacity does not mean that anyone else has the right to make decisions regarding your money or your interest in the business—this applies to your spouse, your business partner and your co-directors. If there is no valid LPA, the person who wishes to help will generally have to apply to the Court of Protection in order to be appointed as a deputy.

That will take a while. According to figures from the Ministry of Justice for 2025, property and affairs deputyship applications averaged 23.9 weeks from the time the court received them until a final order was made, the median being 15.6 weeks. This figure does not include the time needed to prepare the application.

During that period, a business can stall. A bank may restrict access to accounts where you are a required signatory, delay decisions that need your vote, and you may miss contracts or opportunities. Without proper planning, even a thriving business can grind to a halt surprisingly quickly.

What Is a Business Lasting Power of Attorney?

A business last standing order is a legal document whereby you, the ‘donor’, name one or more reliable individuals, your ‘attorneys’, to take the decisions concerning your business interests if you are unable to do so yourself.

There exists no statutory form known as a “Business LPA”; instead it is a Property and Financial Affairs LPA drawn up under the Mental Capacity Act 2005 with the aim of covering your business assets and decisions. It is common for business owners to arrange for such an LPA to be made together with a separate Property and Financial Affairs LPA for their personal finances.

For an LPA to be valid, you must make it while you still have mental capacity, and it must be registered with the Office of the Public Guardian before your attorneys can use it. Registration isn’t instant, which is another reason to put an LPA in place early rather than in a crisis.

The law in this area is being modernised. The Powers of Attorney Act 2023, which received Royal Assent in September 2023, amends the Mental Capacity Act 2005 to allow LPAs to be made and registered digitally, while keeping a paper route for those who need it, and introduces identity checks for those involved. Our team can explain how the current process works when you come to make yours.

Key Features of a Business LPA

Depending on how it is drafted, a Business LPA can allow your attorneys to:

• operate business bank accounts, pay suppliers and staff, and manage cash flow
• deal with contracts, invoices and day-to-day financial decisions
• exercise the voting rights attached to your shares, for example, voting to appoint a replacement director

Professional attorneys. You can appoint a professional attorney, such as a solicitor, alongside or instead of family members. This can help if the business needs someone with commercial or legal experience, or if you would prefer not to place that burden on your family. A professional attorney will usually charge for their time, and the LPA can set out how they are to be paid.

Once registered, a Property and Financial Affairs LPA can be used either straight away with your permission or only if you lack mental capacity. You choose which when you make it. Business owners often find the first option practical, for example during a long stay abroad or in hospital, but the right choice depends on your circumstances.

Instructions and preferences. You can also include instructions your attorneys must follow and preferences they should consider. For example, you might ask them to consult your co-directors or your accountant before making significant decisions.

Business LPA vs Personal LPA: What’s the Difference?

A personal Property and Financial Affairs LPA covers your individual finances, such as your bank accounts, home, pensions and bills. A separate Health and Welfare LPA covers decisions about your care and medical treatment. A Business LPA covers your business decisions and business assets.

Sole traders and partners. As a sole trader, your business is not a separate legal entity, so your business assets are your personal assets. Some sole traders and partners therefore cover personal and business affairs in a single LPA. If you do, think carefully about whether the attorney you would trust with your household finances is also the right person to run, or wind down, your business. Partners should also check their partnership agreement, which may say what happens if a partner loses capacity.

The director limitation. An LPA cannot hand over your role as a director. A directorship is a personal office, and a director cannot delegate their duties to an attorney. What happens to your directorship if you lose capacity depends on your company’s articles of association. Under the Model Articles used by many private companies, a director ceases to hold office when a registered medical practitioner who is treating them gives the company a written opinion that they have become physically or mentally incapable of acting as a director and may remain so for more than three months. Bespoke articles may say something different.

An LPA can give your attorney the power to exercise your shareholder voting rights, including voting to appoint a new director. This matters most for owner-managed companies with a sole director who is also the main shareholder. A private company must have at least one director, and if the only director can no longer act, no one may be able to make decisions on the company’s behalf. An attorney who can vote your shares can help resolve that quickly, subject to the company’s articles and any shareholder agreement.

We recommend that business owners have both a personal LPA and a separate Business LPA, with attorneys chosen for each role. Our Wills, Trusts and Powers of Attorney team can help with the personal side.

What Happens Without a Business LPA?

If you lose capacity without a Business LPA in place, the consequences can build quickly:

• payments to suppliers and staff may be delayed where your authority is needed
• decisions that require your vote as a shareholder cannot be taken
• deadlines may be missed, and clients, lenders or suppliers may lose confidence

Your family or co-directors would usually need to apply to the Court of Protection for a deputyship order. The process can be lengthy, costly, and uncertain, and once appointed, a deputy is supervised by the Office of the Public Guardian and must report on their decisions.

The court also does not guarantee it will appoint the person you would have chosen. If you are already facing this situation, our team can help with Court of Protection deputyship applications. For everyone else, the good news is that the right planning can avoid this scenario.

What Is a Shareholder Agreement?

A shareholder agreement is a legally binding contract between a company’s shareholders (and often the company itself). It sets out their rights and obligations, and how they should run the business.

It complements, rather than replaces, the company’s articles of association. The articles are filed at Companies House and are publicly available. At the same time, a shareholder agreement is a private document, so it can address commercially sensitive matters the articles do not cover.

A shareholder agreement is particularly valuable for private limited companies with more than one shareholder, family businesses where ownership is spread across generations, and start-ups bringing in investors. Without one, shareholders are left with the articles and the default rules in the Companies Act 2006, which may not reflect the owners’ actual intentions.

Key Clauses to Include in a UK Shareholder Agreement

Every business is different, but a well-drafted shareholder agreement will usually cover the following areas.

Rights and Obligations

Voting rights, dividend entitlements, any financial contributions shareholders are expected to make and commitments not to compete with the business.

Decision-Making and Management

Quorum requirements for meetings, voting thresholds for major decisions (often called “reserved matters”) and the procedure for appointing or removing directors.

Share Transfers and Pre-emption Rights

Pre-emption rights give existing shareholders the first right of refusal before shares are sold to an outsider. Agreements also commonly include drag-along and tag-along rights, and good-leaver and bad-leaver provisions that set out what happens to the shares of someone who leaves.

Dispute Resolution and Deadlock Provisions

Mediation or arbitration clauses and deadlock-breaking mechanisms help resolve disagreements without damaging the business or ending up in court.

Confidentiality

Clauses protecting sensitive company information shared between shareholders.

Restrictive Covenants

Restrictions preventing shareholders from competing with the company or soliciting its clients and staff after they leave. To be enforceable, these must be reasonable in scope and duration, so they need careful drafting.

Death and Incapacity

What happens to a shareholder’s shares if they die or lose capacity for a long period. Some agreements give the remaining shareholders the option to buy those shares at fair value, so the business doesn’t end up with an inactive owner and the shareholder’s family receives value for their stake.

How Business LPAs and Shareholder Agreements Work Together

These two documents address different but complementary risks. A Business LPA protects against incapacity. A shareholder agreement protects against disputes, exits and changes in ownership.

They also affect each other. An attorney acting under your Business LPA may be able to vote your shares, but they must do so within the framework set by the shareholder agreement and the articles. If the agreement requires unanimous approval for certain decisions, or says that an incapacitated shareholder’s shares must be offered to the others, your attorney’s role may look very different from what you expected.

That is why the two documents should be drafted with each other in mind. Reviewing them together gives business owners joined-up protection that reflects how their business actually works.

Why Work With a Gloucester Solicitor on SME Legal Planning?

Getting these documents right requires specialist knowledge of both private client law (for LPAs) and corporate law (for shareholder agreements). Advice from separate advisers who don’t speak to each other can leave gaps.

At Tayntons Solicitors, Adam Hampson, our Head of Private Client, advises on Lasting Powers of Attorney. In contrast, Shelley Bonney, an Associate Solicitor in our Corporate team, advises businesses on shareholder and partnership agreements. Working together, they give business owners joined-up advice rather than fragmented guidance.

We are proud to be rated Excellent on ReviewSolicitors, and our approachable, plain English approach means you will always have direct access to someone who can answer your questions.

Frequently Asked Questions

What is a business lasting power of attorney?

A business lasting power of attorney is a Property and Financial Affairs LPA drafted to cover your business interests. It lets attorneys you choose manage business finances and use your shareholder voting rights if you cannot. You must register it with the Office of the Public Guardian before you can use it.

Do I need a business LPA if I already have a personal LPA?

Often, yes. A personal LPA may not be drafted with your business in mind, and the person you trust with your household finances may not be the right person to make commercial decisions. Many business owners have a separate Business LPA with attorneys chosen for that role.

Can my attorney act as a director in my place?

No. A directorship is a personal office and cannot be delegated under an LPA. However, your attorney may be able to use your shareholder votes to appoint a new director, subject to your company’s articles and any shareholder agreement.

What should a shareholders agreement include?

Most shareholder agreements cover voting and dividend rights, decision-making and reserved matters, share transfers and pre-emption rights, dispute resolution and deadlock, confidentiality, restrictive covenants and what happens on a shareholder’s death or incapacity.

Protect Your Business Before You Need To With Tayntons Solicitors

A thriving business can be derailed overnight if the right legal protections are not in place. A Business LPA and a shareholder agreement work hand in hand to protect your business’s continuity, decision-making, and long-term value.

If you would like to discuss protecting your business, speak to Adam Hampson about a Business Lasting Power of Attorney or Shelley Bonney about your shareholder agreement. Call our Gloucester solicitors on 01452 522 047, email info@tayntons.co.uk or request a call back, and a member of the team will be in touch.

Tayntons Solicitors is rated Excellent by our clients on ReviewSolicitors.