What is a Business Lasting Power of Attorney?
A Business Lasting Power of Attorney (LPA) is where you appoint someone to make decisions for your business if you are unable to make them, this may be if:
- You were to have a medical condition that incapacitated you.
- You were to have an accident.
- Or simply, you were abroad for a holiday or business.
An attorney will have the authority to pay bills, sign cheques, deal with business loans, and pay salaries. It is important to remember that, without an LPA in place, a family member or business colleague may not gain authority to make these decisions on your behalf. Meaning your business could be exposed to risk.
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Is a business LPA the right thing for me?
A business LPA will be appropriate in most scenarios, but it’s important to consider what type of business you own.
If you are a sole trader, your business is unlikely to have a separate legal entity, other than you. This means that appointing an attorney under a Business Lasting Power of Attorney will be an effective approach for you to ensure the continuation of your business if you become unable to act.
Check the conditions of the partnership agreement if you are a partner in a partnership with multiple partners. Some partnership agreements may already cover what happens if one of the partners becomes incompetent. If a provision like this exists, it may already fully provide for business continuity, in which case a business LPA would not be required.
However, if you have any doubts about the provisions in the partnership agreement or believe that an LPA may be necessary, you should get legal advice on the wording of the LPA to ensure that it does not conflict with the provisions already in the partnership agreement.
Director of companies: articles of association
Check the articles of association if you are a director of a firm. Articles of association often provide for the termination of a director’s appointment if the director loses capacity. This is often done in order to safeguard the interests of the company. If such a provision is not included in the articles of incorporation, you should seek guidance and consider including one.
If you are the only director of a small private company, the articles of association are unlikely to simply dismiss your appointment, as there would be no one else to administer the company. A business Lasting Power of Attorney would be appropriate in these circumstances.
Can you make an LPA covering your personal and business affairs?
It may be possible to assign attorneys to manage both your personal and corporate assets through a single LPA. However, due to a potential conflict of interest, it may not be suitable for the same person to make both personal and corporate decisions. Consider creating an LPA that appoints specific attorneys to manage your personal assets and others to manage your business assets. However, keep in mind that this may cause doubt about the scope of the attorneys’ powers, and the LPA is likely to be rejected by the Office of the Public Guardian.
Fortunately, more than one LPA can be created. You may create one for your personal concerns and another for your commercial affairs. People often like to keep their professional and personal concerns separate, so this alternative is desirable.
If you are considering making two LPAs, each should include specific instructions limiting the scope of the attorneys’ powers; for example, a personal LPA should state that your attorney will have general power over your personal affairs, except for the relevant business assets for which you have executed a separate business LPA. Your company LPA should also include precise guidelines in this regard. Your attorneys will then understand their roles and will not interfere with each other’s responsibilities or decisions.
What happens if I don’t make a Business Lasting Power of Attorney?
If you become unable to make business decisions in the future and do not have a business LPA in place, you may need to apply to the Court of Protection for the appointment of a deputy to act on your behalf. The procedure can be costly, and there is no guarantee that the Court of Protection would select someone you would have preferred. It may also take more than six months to appoint a deputy, during which time your company may be vulnerable and at risk.
Consider creating a business LPA as part of any business owner’s continuity plan and crisis management approach to avoid disruption.