Pharmacy Succession Planning
In this article I will deal with some issues which should be addressed by pharmacists who are sole traders, i.e. the sole proprietor of their pharmacy business, and pharmacists who are the sole director and sole shareholder in a pharmacist’s body corporate which is the sole owner of a pharmacy business.
If you are a sole trader you should have prepared an enduring power of attorney in favour of a trusted relative, friend or advisor. This will enable the attorney to sign documents as required in the event of your absence due to illness or on leave and, in case you lose capacity due to illness or injury, to manage your affairs on your behalf. You also should make a will to deal with what happens to the pharmacy business and your other assets in the event of your death.
If you are a sole director and shareholder of a pharmacists’ corporation you should have prepared a power of attorney from the company to a trusted relative, friend or advisor to enable them to sign documents as required in the event of your absence or unavailability.
You should particularly note in this regard that, contrary to popular belief, a power of attorney given by you personally is not legally effective to delegate the power to sign for you in your capacity as a director of a company. However, an enduring power of attorney will be effective to enable your attorney as your personal representative to appoint a new director in the event you cannot manage the company because of incapacity.
If the sole director and shareholder of a company dies, a successful business can come to a crushing halt. If the deceased was the sole signatory on the company bank accounts the company may become paralysed, face cash flow problems, be unable to pay its employees and rent and, at worst, be deregistered or wound up.
There is help available by way of the Corporations Act. Under section 201F(2) the personal representative or trustee of a deceased sole director or a director who loses capacity may appoint a new director. A personal representative is usually the person who is appointed executor under the will of a deceased person or the person granted letters of administration, if there is no will and the deceased died intestate, and includes an attorney under an enduring power of attorney of an incapable person.
The court is also empowered to appoint a director to preserve the assets of the estate or allow the business to continue running but this can be a costly process.
If a sole director and sole shareholder dies without a will, someone, usually a close family member, has to apply for letters of administration. This process can be lengthy and may be further complicated if there are competing persons applying for the role of administrator or if no one wants to apply for the role of administrator. If no family member wants to apply for letters of administration and there is no one to administer the estate, a creditor of the deceased may apply for letters of administration and may seek the winding up of the company to recover its debt which, in turn, may bring the company and the business to an end.
These potential problems are alleviated if the sole director and shareholder has made a will. If you are a sole director and shareholder of a company, you should have a will, and it is recommended that in your will you leave your shares in the company to a named beneficiary or beneficiaries.
In summary, to cover all bases, if you own your pharmacy through a pharmacists’ body corporate of which you are the sole director and sole shareholder:
- The company should execute a power of attorney.
- You should execute an enduring power of attorney and
- You should make, or review and update, your will.