Do I need a Lasting Power of Attorney for my Business?

A lasting power of attorney, or LPA as they are often referred to, are extremely useful to put in place during your lifetime. 

An LPA ensures that, should you be unable to manage your own affairs, the people you have appointed can manage your business on your behalf. This can save a great deal of money and distress, and will ensure that your business affairs will be handled correctly and quickly. LPAs give authority to those you chose to act on your behalf to make nearly all decisions, financial or otherwise, if you were to become mentally or physically unable to do so yourself, or even if you were going to be out of the country for a while.

So, how would they apply in a business situation?

An accident, physical ill health or the onset of mental illness may make everyday tasks like 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 automatically 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 and who you trust 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 your 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.

What happens if I do not have an LPA?

If you do not have an LPA in place, an application would then have to be made to the Court of Protection to enable someone else to deal with your affairs. The process to apply for a deputy application is a much lengthier process (at least 6 months, with your assets potentially frozen) than applying for an LPA, not to mention costlier (three times the cost of an LPA and sometimes more). It doesn’t stop at the application, either. When you become a deputy, you must send an annual report to the Office of the Public Guardian each year, explaining the decisions you’ve made.

How do they apply to the different business structures?

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.

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.

Self-employed – If you are self-employed running your own business, again, you will not have a separate legal identity to your business and a Business LPA will be needed to continue trade.

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 someone else to come in and for the business to continue to trade.

If your business doesn’t already have the protection of a Business LPA in place, then we recommend you look into getting one.

At Mayo Wynne Baxter we have a number of experts that can advise on the best way to legally protect you and your business. Please feel free to contact the team at Mayo Wynne Baxter for expert legal advice and to discuss how we can help with the preparation of lasting powers of attorney, or for any other legal questions you may have.

Jessica Partridge
Partner
jpartridge@mayowynnebaxter.co.uk
www.mayowynnebaxter.co.uk