Scarlett Richardson, a solicitor from Harrison Drury's private client team, outlines the reasons why you may consider preparing a Business Lasting Power of Attorney to protect your business interests.
As a business owner, it's important to consider what may happen to your business if you are unable to continue making important business decisions. This may be due to ill health, an accident, or long-term illness. It may also be due to you being abroad and unable to attend important meetings or sign contractual paperwork and agreements.
This is particularly relevant at present given the often-changing restrictions between traveling to and from other countries due to the COVID-19 pandemic, which may leave you unexpectedly unavailable to deal with important business matters.
If you were to lose capacity to make essential business decisions for any of the reasons above, there are several matters that would need to be addressed:
- Would your bank freeze your business account?
- Who would approve payment of wages to your employees?
- How would you agree contracts for the supply of goods within your business?
- How would you comply with standards set by your regulatory body?
The short answer is that without a Business Lasting Power of Attorney (BLPA) in place you may struggle to deal with these matters. This may cause your business to cease trading or be in breach of certain contracts or legislation.
What is a Lasting Power of Attorney?
A Lasting Power of Attorney (LPA) enables people to choose someone they trust to make decisions on their behalf if they are no longer able to make decisions for themselves. It is a formal document whereby the 'donor' appoints one or more person (the 'attorneys') to manage their property and finances and/or health and welfare.
These decisions could be required if you lose capacity on a permanent basis, are involved in an accident and temporarily incapacitated or you are away and not present to sign important documents.
You can learn out more about LPAs in our previous blog post: Lasting Power of Attorney – The importance of making the right choice.
Do you need both a business LPA and a personal LPA?
A Business Lasting Power of Attorney is a Lasting Power of Attorney that is restricted to decisions regarding your business. Therefore, it is likely to mean you may need several Lasting Powers of Attorney running concurrently. You may have one appointed to look after your personal finances, one for your health and one specifically to manage your business interests.
Choosing a suitable Attorney to manage your business affairs
Typically, people appoint their spouses or children to act as their attorneys to manage their personal finances should they lose capacity or require assistance for another reason.
It is advisable to consider whether an attorney appointed under an existing financial Lasting Power of Attorney is best suited to manage your business affairs as well if you lost capacity. Would your family members have the requisite knowledge and understanding of your business to ensure it continues to operate effectively whilst ensuring all legal obligations are dealt with?
An attorney appointed within a BLPA should be someone you trust and who is familiar with the business. Once registered, the BLPA will enable your attorney to make financial decisions on your behalf, including buying and selling property, accessing bank accounts, opening and closing bank accounts and investing assets.
In addition, some professions including solicitors and accountants must comply with the regulations set by their regulatory body, therefore it is often the case that if they wish to prepare a BLPA, another solicitor or accountant needs to be appointed for it to be valid.
What happens if I don't prepare a business LPA?
If you don't have a BLPA in place and you do lose capacity, an application will need to be made to the Court of Protection for the appointment of a deputy. This deputy will act on your behalf under the authority of the court. This is an expensive route and can take minimum six months to put in place and there are no guarantees of who the court will appoint.
To avoid disruption, it should be part of any business owner's continuity plan and crisis management strategy to consider preparing a business LPA.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.