Working with potentially dangerous machinery, vehicles, chemicals, livestock, at height or near pits and silos, together with the high pressures involved in running a successful farming business, makes farming a hazardous industry. As well as creating a plan for the succession of the farm business on death, it is important for farm owners to put a contingency plan in place should the owner become unable to take an active role in its day-to-day activities, through old age, accident or mental/physical illness. At the very centre of this plan should be a Lasting Power of Attorney for Property and Financial Affairs (‘LPA’).

What is an LPA?

An LPA is a powerful legal document that allows a person to appoint trusted individuals (known as attorneys) to help them make decisions, or make decisions on their behalf if necessary. Attorneys can be family members, friends or professionals. It is important that the chosen attorneys have the right qualities, skills and experience.

There are two types of LPA – one to deal with property and finances and one to deal with health and welfare. Both are recommended, but it is the LPA for property and finances that is most important in the context of a contingency plan for farming businesses.
If a person is no longer able to deal with their property and finances and does not have an LPA in place, someone will need to apply to the Court of Protection to be appointed as a deputy. This process usually takes at least six months and the costs involved are much higher than those for setting up an LPA. If financial assets such as bank accounts cannot be accessed during this time, suppliers’ invoices cannot be met, employees will not receive their wages and loan/mortgage payments will fall into arrears, all of which can have a profound emotional impact on the farmer, their loved ones and others involved in the farm.

There is lots of choice as to when and how your attorneys act, and it is therefore best to seek specialist legal advice to create a bespoke LPA created specifically to suit your circumstances. Considering how the LPA interacts with other legal documents may also be important, depending on how your farming business is set up.

Farms run as companies

It is important to review the Company’s Articles of Association and any Shareholders’ Agreements as these may contain some provision for dealing with directors who become incapacitated. As a shareholder, the LPA could give guidance to the attorney on how they can exercise the farmer’s voting rights.

Farms run in partnership

It is important to review any Partnership Agreement in place for provisions handling the mental or physical incapacity of the owner. If there is no Partnership Agreement in place, then the Partnership Act 1890 comes into force and an 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

Sole traders do not usually have any formal documents in place for the business. For that reason it is extremely important that the farmer has an LPA in place to ensure that staff wages, loans and mortgages are paid on time and other issues, such as taxes due, are dealt with promptly.

Conclusion

All farms should have robust contingency plans in place should the owner become mentally or physically incapacitated. Having an LPA in place to sit alongside relevant insurance policies should be considered essential in order to ensure uninterrupted running of a farm should the owner become unable to take an active role in its day-to-day activities.