– 15th January 2020
A Lasting Power of Attorney is a legal document through which you appoint an authorised person (known as an attorney) to make certain decisions on your behalf if you became unwell or lose the capacity to make decisions.
A Lasting Power of Attorney can be used to manage your personal life and finances or your business. Family members or colleagues cannot step in automatically to make decisions on your behalf, if you were unable to.
As a business owner, it’s important to consider what would happen to your business if you were unable to make decisions. This may be if:
- you were abroad on holiday or for business
- you were to have an accident
- you were to have a medical condition that incapacitated you
In such circumstances, who would authorise the payment of bills, sign cheques, service a loan or pay salaries? What would happen to your employees? Banks can freeze the accounts to protect the vulnerable adult. Unless you have a business LPA and have appointed an attorney, fundamental business operations may not be possible – access to bank accounts may be denied, suppliers won’t get paid, contracts could compromised or lost, insurance premiums won’t be renewed and salaries could go unpaid. Your business could be exposed if you do not have a business LPA. To protect your business interests, you should consider a business LPA.
Sole Traders
If you are a sole trader, your business is not likely to have a separate legal entity from you. If you appoint an attorney under a business LPA then it is an effective way for you to make provision for the continuity of your business, if you are incapacitated.
Partnerships
If you are a partner in a partnership, you will need to check the terms of the partnership agreement. Some partnership agreements may already include provision for what would happen should one of the partners become incapacitated. If they do not have a specific provision, then it would be sensible to have a business LPA.
Directors of companies: articles of association
If you are a director of a company, check the company’s articles of association. Articles of association may provide for the termination of a director’s appointment if a director loses capacity. If such a provision is not included, then you may wish to seek advice and include such a provision. If you are a sole director of a private company, the articles are not likely to terminate the director’s appointment. In this situation, you would need to draft a business LPA.
Business and Personal Affairs
You can have one Lasting Power of Attorney to cover your business and personal affairs. However, you may feel that it is inappropriate to have the same person/people as attorneys to make both personal and business decisions. For example, you may want your spouse for your personal finances and you think a business colleague is the best suited person to deal with your business. You can make two separate LPAs with certain attorneys to manage your personal affairs and different attorneys to manage your personal affairs. This option is often appealing as people like to keep their business affairs and personal affairs separate.
Appointing a suitable attorney
This should be someone you trust and who you know is capable of doing the job how you would want it done, is familiar with the business and who has a similar outlook and knowledge of the market and business as you. Once, the LPA is in place, you can restrict what an attorney can do, otherwise they can buy or sell a property, organise property insurance and repairs, access banks, open and close accounts, invest assets and deal with tax affairs. It is possible to have a sole attorney or joint attorneys. You can have attorneys to act jointly for some decisions and separately for others.
What happens if I don’t have a business LPA?
If you don’t make a business LPA and become incapacitated then an application would have to be made to the Court of Protection for a deputy to act on your behalf. The process can take a long time and be expensive. There is no guarantee that the Court would appoint the person that you would have chosen. It could take several months for a Deputy to be appointed which would leave your business vulnerable and at risk. It should be part of the crisis management plan for every business.
If you would like to make a business LPA or would like further information, please do not hesitate to contact Battrick Clark on [email protected] or 0117 973 1391.