CONTACT US
As a business owner, it’s important to consider who would look after your business if you were unable or unavailable to make decisions.
While it’s likely you have carried out risk assessments, identifying and planning for possible risks such as fire and theft, you may not have thought to prepare for what would happen if you were incapacitated.
As well as mitigating risk, Business Lasting Power of Attorney’s (Business LPA) can offer you some peace of mind.
Lasting Power of Attorney vs Business Lasting Power of Attorney
Introduced in 2007, a Lasting Power of Attorney (LPA) is a legal document that allows you, the Donor, to nominate an attorney that can make personal decisions for you or act on your behalf if you are no longer able to or no longer wish to make your own decisions.
Similarly, a Business LPA allows you to choose an attorney to make decisions on your behalf with regards to your business.
Why should you appoint a Business LPA?
Should a business owner lose mental capacity, there are likely to be crisis management implications for the whole business. Contractual and regulatory breaches may occur, affecting other partners and directors. Financial institutions are also likely to freeze accounts and overdraft facilities, making it difficult to pay creditors and salaries.
If there is no Business LPA in place and a business owner is unable or unavailable to make decisions, then an application will need to be made to the Court of Protection to have a deputy appointed. In this scenario, there is no guarantee that the Court will appoint the same person you would have chosen. Additionally, this process can be costly and time consuming, exposing your business to further risk while the court processes the application which typically takes between 3 - 6 months.
Who is a business LPA suitable for?
- A sole trader
- A self-employed person
- A director of a company if a director’s incapacitation is not covered by the articles of association or memorandum of association
- A partner of a partnership is the partner’s incapacitation is not covered by the articles of association or memorandum of association
To avoid a conflict of interest, it is recommended that you choose a different attorney for your personal and business affairs. While your personal attorney is likely to be a spouse, family member or close friend, your business attorney could be a colleague or fellow director. It is important to consider choosing someone with experience of the business and its day-to-day operations.
Putting a Business LPA in place can reduce the disruption and cost on your business if a serious event was to occur. Appointing a Business LPA should become part of your risk management and business continuity plan.
For further information on any of the above, please get in touch with
Tracey Ledgister Forbes.