You may have heard of Lasting Powers of Attorney (LPAs) for managing personal affairs like health or to oversee personal finances, but did you know you can create a Lasting Power of Attorney for your business too?
One of the lessons learned from the pandemic is not to assume Lasting Powers of Attorney are just for the elderly and only useful when people lose mental capacity. The sad reality of much younger people being incapacitated or hospitalised and unable to deal with their finances has seen an increase in demand for Lasting Powers of Attorney amongst the younger generation – particularly those who own their own businesses.
Why do business owners need a Lasting Power of Attorney?
A Lasting Power of Attorney allows nominated Attorneys to make decisions on your behalf. For business owners – especially small business owners with employees, and the self-employed or sole traders – ensuring the business is protected from your incapacity is vital.
Business Hybrid Lasting Power of Attorney
There are two types of Lasting Power of Attorney widely utilised; one covering Property and Financial Affairs and one to deal with Health and Welfare issues. A hybrid of the Property and Financial Affairs LPA is one drafted specifically to cover business interests and may have different Attorneys appointed than those chosen to deal with personal finances in view of the various tasks associated with running a business such as financing, accounts, property matters, staff, payroll, production etc. that may require attention.
What happens if I don’t have a Business LPA?
The reality of a business owner being unable to continue the day to day running of their business is very concerning and often overlooked. Who would assume control or have the authority to make decisions should a business owner be unable to? This is clearly a risk to the business.
Without a Business LPA in place, an application to the Court of Protection to appoint a Deputy would have to be made. There would be no guarantee that the Court would appoint the person you would have chosen, and the process is usually time consuming and costly.
How long do Deputyship applications take?
Deputyship applications can take up to six months and during this period the business would be frozen meaning invoices and insurances going unpaid.
Ensuring business continuity
When drafting Business LPAs it is important to consider a company’s articles of association or a partnership agreement that may be in place as these may already deal with incapacity; however sole traders or the self-employed may have no such arrangements in place.
It is also important to draft bespoke and detailed instructions as to the powers and duties the Business Attorney will have and, of course, to ensure that the choice of Business Attorney is made carefully, with due consideration and with the agreement of the person being chosen to act.
Putting a Business LPA in place should be an integral part of a Business Continuity or Disaster Plan and will bring peace of mind to business owners and their families alike.
For more information on business LPAs and how we can help you to protect your business, please contact us.