Company law – changes to the Mental Health Act

Year Published: 2013

Earlier this year the Mental Health (Discrimination) Act 2013 came into force and amends certain provisions of the model articles for both private and public companies. The model articles are a set of rules which new companies can adopt as their constitution when a new company is formed.

By way of background the 2013 Act was introduced following criticism that the previous form model articles discriminated against individuals suffering with mental health issues by affecting their ability to serve as company directors.

In future any company formed using the model articles will find that existing provisions which require the automatic termination of a director’s appointment, in the event that a director’s rights or powers are restricted by a court order on mental health grounds, will no longer be included in the model articles.

It is recognised there may be genuine concerns for any board of directors as to the impact of any one director’s performance being affected by mental health, especially where the board is small.

However it is important to note that the 2013 Act will not have any impact on existing articles of those companies formed using the model articles before 28 April 2013 or indeed companies which have adopted bespoke articles either now or in the future. As a result of this, many companies constitutional documents may already or indeed in the future may contain automatic termination provisions in the event of a director’s mental health.

Even if the power remains available to the company, care should be exercised when seeking to rely on such an automatic termination provision on the basis that it still may offend anti discrimination legislation.

On the basis that there are likely to be hundreds of thousands of companies which still have constitutional powers to terminate a director in the event of mental health, the 2013 Act is limited in its application. However, the introduction of the 2013 Act is a starting point of raising awareness of mental health issues in business and an acknowledgement or acceptance of recognisable mental illnesses, which may require additional support for the directors who find themselves in this situation.

For professional legal advice on matters of this nature please contact a member of our Corporate team on 0161 475 7676.

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