Protecting shares and company interests when suffering from mental health issues

[Hopingtogrow]

Hello,

I am interested in what can be done for a potential company partner who suffers from mental health issues. The company has not yet been registered, and there are discussions ongoing about how the company should be split. Ideally, the partner with the mental health issues should have a 51% share of the company. However, he/she, as mentioned, suffers from mental health issues, and the concern is what may happen during one of these "episodes". During such an episode, the partner is prone to giving money away, and the fear is that once the company is registered, that shares may be given away, or terrible decisions be made on behalf of the company.

With this in mind, what protections can possibly be put in place to prevent catastrophic scenarios? These mental health episodes can last for months if untreated, although they are usually treated and resolved within 2 months. They are irregular, occurring once every few years.

One suggestion is that the share spilt for the person in question should be 49% or less. Is this the only way forward? Or is there a way for the person to retain a 51% share, and for the business to be protected? (The business is being split between three people)

Thank for your time, and hope that you can help.

[echat11]

Hi Hopingtogrow

I think the shares is easy, but not sure how easy it is to do, the shares could be held in a trust, but can't be accessed until proper authority is gained from a third party. The difficult bit is making 'terrible decisions', what you could do is make the person a 'sleeping partner', so won't be involved in the decision making process, again I'm not sure how easy that would be to do.

[Hopingtogrow]

Hi Hopingtogrow

I think the shares is easy, but not sure how easy it is to do, the shares could be held in a trust, but can't be accessed until proper authority is gained from a third party. The difficult bit is making 'terrible decisions', what you could do is make the person a 'sleeping partner', so won't be involved in the decision making process, again I'm not sure how easy that would be to do.

Thank you for the reply. The shares being held in a trust sounds like a good idea.

With regards to the "sleeping partner", this isn't really an option, since, in the majority of the time, the business will definitely require the input of this person.

Perhaps the 49% share option is best.

[echat11]

Thank you for the reply. The shares being held in a trust sounds like a good idea.

With regards to the "sleeping partner", this isn't really an option, since, in the majority of the time, the business will definitely require the input of this person.

Perhaps the 49% share option is best.

Providing the Partner agrees to not have a controlling stake in the business.

[Hopingtogrow]

Providing the Partner agrees to not have a controlling stake in the business.

Ah okay. Hmmmm... I'm still debating how to approach this issue. Is there any organisation we could speak to for anonymous advice around this? I don't want to jeopardize any potential grants, so I would like to avoid talking to organisations like Business Gateway.

[echat11]

You could try, they provide free legal advice for members -

https://www.fsb.org.uk/join-us.html?...RoCBncQAvD_BwE

[Hopingtogrow]

You could try, they provide free legal advice for members -

https://www.fsb.org.uk/join-us.html?...RoCBncQAvD_BwE

That's brilliant - thank you.