Lasting Powers of Attorney for Business Owners
Most business owners have not considered what would happen to the day to day running of their business in the event of their own physical or mental incapacity. If they were in a car accident or suffered a stroke, who would pay any bills, make sure staff received their wages, meet loan and mortgage payments and fulfil any contracts?
What is a Lasting Power of Attorney (LPA)?
A Lasting Power of Attorney, also known as an LPA, is a legal document that allows you to appoint people that you trust to help make decisions with you (if you still have mental capacity) or on your behalf should you lose mental capacity temporarily or permanently in the future.
Appointing someone to act under an LPA is often considered when planning for the future. It is different to a Will, as it covers what will happen during your lifetime, but is often put in place at the same time.
Anyone over the age of 18 can make an LPA as long as they have the mental capacity to understand the document and the power that they are giving to their Attorneys. If someone does not have that capacity, then it will be too late to set up an LPA and an application to the Court of Protection to appoint someone as their Deputy will be required. This process can take many months to be completed.
What is a Business Lasting Power of Attorney (BLPA)?
While an LPA is typically utilised for managing personal affairs, it can be customised to also encompass business-related elements. This means it can specify the same or different persons, compared to those in your personal LPA, to make decisions about your business. As a business proprietor, you might choose a trusted business associate to serve as your Attorney in a Business LPA (BLPA), and your spouse or children to handle personal affairs under a separate LPA.
Who is involved?
The Donor is the person setting up the LPA to cover their affairs.
The Attorneys are the people appointed to manage the Donor’s affairs. Under a BLPA, the Attorneys should be trustworthy, competent and reliable. They should understand your business and be given clear guidance on how it should be run. They should have the skills and expertise to act on behalf of the Donor.
The Certificate Provider is someone who confirms that the Donor has the mental capacity to understand and enter into the LPA.
Process:
- Choose who will be your Attorney(s). There is also the option to choose Replacement Attorneys.
- Consider any particular guidance or instructions you wish to add to the document to help the Attorney(s) deal with your affairs.
- Decide who will be your Certificate Provider to confirm that you have the capacity to enter into the LPA. This could be a doctor, health professional, solicitor or someone who has known you well for a number of years.
- Once all parties have signed the LPA, it will be sent for registration at the Office of the Public Guardian.
- The LPA cannot be used until it is registered.
- Consider setting out a detailed plan about the running of the business for your Attorney in the event of your incapacity.
Why set up a BLPA?
A Company or a Partnership could be left with a Director or a Partner who is not capable of fulfilling their duties and responsibilities due to a physical or mental incapacity. There may be insurance, regulatory or statutory breaches if the particular Director or Partner cannot fulfil that role. In event of a business owner becoming incapacitated, having a BLPA in place can:
- Promote business continuity;
- Provide reassurance and protection to business associates and employees;
- Give security of the business as a going concern for sale purposes;
- Reduce insurance risk;
- Protect against creditors bringing debt claims; and
- Prevent the loss of reputation and goodwill.
Having a BLPA in place ensures that there is someone legally appointed to stand in your place to make decisions and allow business continuity at what will already be a difficult time for all involved.
