What is a Business Lasting Power of Attorney (LPA)?
People can become unable to manage their affairs at any stage of life. An accident, physical ill health or the onset of mental illness may make everyday tasks such as paying bills and managing a budget difficult, stressful and, in some cases, impossible. It is therefore important for any business owner to consider what would happen to their business if they became unable to make decisions in such circumstances. You should not assume that a family member or a business colleague will gain the authority to make these decisions on your behalf. Having a Business LPA in place allows you to appoint an Attorney who understands your business to take over the day-to-day affairs as soon as is necessary. Without such a document in place there can be a detrimental impact on a business for example, banks may freeze accounts, contracts may not be entered into and business insurance could be invalidated. Your business could also be in breach of its regulatory obligations if a key business owner is incapacitated and measures are not in place. A Business LPA is necessary for an effective business continuity plan. It is also important to note that a business LPA need not only be used if you lose capacity but can also be used if you travel abroad on holiday or for business.
How will a Business LPA apply to my business?
A Business LPA will be an important consideration for business continuity in most cases but it is necessary to consider and seek advice about the type of business you own.
- Directors of companies – If you are a Director of a company it will be necessary to check the company’s articles of association to consider whether this provides for the termination of a director’s appointment if they lose capacity. If you are a sole director of a private company then the company’s articles of association may not provide for the termination of a director’s appointment and a business LPA will be necessary for business continuity.
- Sole trader – If you are a sole trader, your business will not have a separate legal identity and therefore a Business LPA will be necessary for the business to continue to trade.
- Self-employed – If you are self-employed running your own business then again, you will not have a separate legal identity to your business and a Business LPA will be needed to continue trade.
- Partnerships – If you are a partner in a business with several partners, the partnership agreement may provide for what should happen in circumstances where a partner loses capacity. You may need to seek advice on the contents of the partnership agreement and, if a Business LPA is required, further advice on the wording of the document so that it does not conflict with provisions within the partnership agreement.
How do I prepare a Business LPA?
Business LPAs are prepared in the same way as an individual’s LPA for their personal property and financial affairs but will be tailored to a business owner’s specific needs and requirements in relation to their business. Guidance is provided within the document confirming the extent of the business Attorneys’ powers in relation to the business. The LPA must be registered by the Office of the Public Guardian whilst you still have mental capacity to take effect.
Who should I appoint as my Business Attorneys?
It is important to have LPAs in place for personal financial affairs as well as business affairs. It may be possible to have just one LPA appointing the same Attorneys to manage both personal and business affairs but this could cause a conflict of interest and confusion for Attorneys. In addition, business Attorneys may be subject to regulatory and insurance requirements. It is therefore advisable to complete separate LPAs for your personal and business affairs with separate Attorneys appointed under both documents. This allows you to keep your personal and business affairs separate and ensure that appropriate Attorneys are appointed who you trust are able to deal with each aspect of your affairs. You may wish to appoint a family member under your personal LPA and a co-worker under your business LPA. Such individuals will be familiar with each aspect of your affairs so that you can be confident that they would make the same decisions as you should you be unable to act. It is important that advice is sought to ensure both LPAs are clear on the scope of each Attorneys powers so that your Attorneys are then clear about their powers and do not encroach on the other’s decisions.
What happens if I do not make a Business LPA?
If you do not have a Business LPA in place and you are unable to make business decisions, it may be necessary for a Deputy to be appointed to manage your affairs. This can be an expensive and lengthy process with the possibility of preventing trading whilst the Court of Protection makes a decision on who to appoint as your Deputy. There is also no guarantee that the Court of Protection would appoint the person you would have chosen to manage your business. It is therefore important to have a Business LPA in place to ensure business continuity and that your own wishes for your business are followed should you become incapacitated.
How can we assist you?
LPAs are lengthy documents and any mistakes made in completing them will often only be found once it is too late to rectify them. If the Office of the Public Guardian refused to register your Business LPA as a result of a mistake made, your Attorneys will not be able to act for you. We can advise and prepare Business LPAs for you as well as provide guidance on who you may appoint, how a Business LPA may be used by your attorneys, the restrictions and conditions you should consider including and will ensure the document is correctly completed. Please get in touch with one of our team who would be more than happy to meet you at one of our offices or at home to discuss your wishes for a Business LPA.