Advance Directive for Entrepreneur

Advance Directive for Entrepreneur

Persons who lead a company have to minimize risks to their company. This also includes thinking about what will happen if they are no longer capable of sound judgment. After an accident, after a serious illness, or as a result of age, for instance. An advance directive is also a suitable tool for entrepreneurs. 

Since the revision of the guardianship legislation, an advance directive allows self-determination in the event of impaired judgment, e.g. due to an accident or a serious illness. An advance directive determines when and by whom you want to be cared for in the event of a loss of judgment. The care determined in an advance directive can include personal care and/or financial care, as well as representation in legal matters. If no advance directive exists and the precautionary measures are insufficient, then Child & Adult Protective Services (CAPA) will order a conservatorship.

Entrepreneurs have to take into account that not all their needs can be covered by means of an advance directive. Entrepreneurs must distinguish between two levels: on the one side, their own persons (private individual and entrepreneur) and, on the other side, their companies. It should be noted that the continuation of the company's operations can only be indirectly defined by the advance directive.

What Can Be Defined

In addition to the corporate, contractual, and organizational solutions it provides, an advance directive is also an important instrument for risk minimization and succession management. This is especially true when it comes to making sure participation rights in the company can be assumed quickly. For both temporary and permanent loss of judgment, entrepreneurs can determine in an advance directive for themselves and for parts of their companies who will make economic decisions for them. Depending on the configuration, entrepreneurs can, for instance, determine who should replace them as a partner or shareholder at annual general meetings or in other committees. In particular, they have the option of issuing instructions for the exercise of voting rights. Entrepreneurs also have the option of making personnel suggestions for filling their functions within the company. Depending on the respective legal form and the specific situation (e.g. voting majority), entrepreneurs have the right to designate their successors to the board of directors.

Finally, an advance directive can ensure operational continuity or, if needed, an orderly liquidation or meaningful merger. The guidelines and policies for fundamental business decisions must be carefully considered.

Different People for Different Tasks

It is also advisable to entrust corporate tasks and private assets to different people. The financial care for private securities and real estate requires different skills; it therefore makes sense to entrust different people.