With the full impact of COVID-19 still unknown, we are currently experiencing a time of significant change and uncertainty. Not surprisingly there is a level of fear and unrest as we struggle to understand its impact on our daily lives.
Ensuring we have robust and viable succession plans is a positive way we can ensure increased security in an uncertain climate.
I am a business owner. What types of things should I be considering?
Business succession planning is critical at all stages of the business life-cycle. The COVID-19 pandemic restates the need for ensuring businesses have properly documented business succession plans in place setting out what is to happen if a business owner passes away, becomes permanently or temporarily incapacitated or bankrupt. In addition, businesses should ensure their existing shareholder, unit holder and partnership agreements remain current and relevant.
In addition to ensuring appropriate succession documentation, businesses should ensure that have a ‘crisis management plan’ detailing how the business is to be managed in the current environment.
These plans should include at least the following:
- Measures to assist in stopping or slowing the spread of the coronavirus throughout the workplace
- Contingency plans to ensure the business can continue to operate (where possible) if employees are required to self-isolate or become unwell
- Who is to make key business decisions if business owners or key employees become incapacitated or otherwise unable to make those decisions
- Putting in place mechanisms to ensure multiple parties are authorised to undertake fundamental and day-to-day business operations (for example, access to passwords, authorities to access bank accounts, authorities to facilitate payroll etc).
Should business owners and directors put powers of attorney in place?
We recommend all key decision-makers (sole traders, directors, partners etc) have powers of attorney giving nominated persons the legal authority to act on their behalf in respect of legal and financial matters.
Please remember that a power of attorney does not allow someone to act on your behalf as a director of a company. This is because the role of director is a personal right that cannot be delegated. Accordingly, companies should put in place corporate powers of attorney authorising persons to act on behalf of the company when its directors are unable to so act.
My estate planning is not up-to-date. What documents should I be putting in place?
Having an effective estate plan means more than simply having a Will. The following are some of the documents you should ensure are in place and up-to-date sooner rather than later:
- Will: Having a properly drafted Will in place ensures your assets pass in accordance with your wishes and can often avoid unnecessary tension and costly estate litigation down the track. You should ensure that not only do you have a current Will in place but also that it reflects your current wishes.
- Superannuation nominations: Your superannuation death benefits do not automatically form part of your estate on your death. Executing a binding death benefit nomination is one way to ensure your superannuation death benefits will pass according to your wishes. If you are unsure if you already have a valid nomination in place, we recommend you contact your superannuation fund for confirmation.
- Enduring powers of attorney: An enduring power of attorney gives someone else the power to make decisions regarding your legal and financial affairs in the event you are unable to make those decisions for yourself. With self-isolation or even quarantine a distinct possibility, it is critical that you consider who may act on your behalf if you are unable to do so. It may even be worth permitting your attorney to act even where you still have capacity (i.e. where you are mentally competent but in ‘lock down’).
- Appointments of enduring guardian: The appointment of an enduring guardian allows someone else to make health and lifestyle decisions on your behalf. Although having an enduring guardian in place is critical for all of us, this will especially be so for members of our community within a high-risk demographic at greater risk of becoming hospitalised over the coming months . You should also consider your end-of-life wishes and ensure that your guardian is aware of them.
- Family trust successor nominations: Assets held in discretionary trusts (commonly known as 'family trusts') will continue to be held in these structures post death and cannot be transferred under the terms of a Will. Instead, it is essential that control of the trust passes to the appropriate persons in accordance with the terms of the trust deed governing the trust.
I am self-isolating or practising social distancing. How can I execute the necessary documentation?
The vast majority of us are currently self-isolating or practising some form of social distancing and this is likely to increase over the coming weeks. This makes it increasingly difficult for people to have documents witnessed in compliance with existing rules and protocols.
There are strict requirements for the valid execution of a Will in New South Wales including that a Will must be executed in the presence of two independent witnesses. However, the Court may dispense with the requirements for due execution where it is clear that a person intended the relevant document to be their Will.
If you are required to self-isolate due to COVID-19 and are unable to sign your Will in the presence of two independent witnesses, we recommend:
- You execute an informal Will by signing and dating the Will
- You prepare and sign a statement setting out the reasons for non-compliance with the execution requirements and that you intend the relevant document to be your Will
- If possible, you complete the above steps during a video conference with your legal advisor
- You execute a formal Will immediately following expiry of your isolation period
Powers of attorney and appointments of enduring guardian must be signed in the presence of a qualified lawyer or other prescribed witness and you will not be able to put these documents in place whilst in isolation. You should therefore ensure these documents are in place sooner rather than later.