A LASTING Power of Attorney (LPA) is a legal document enabling you to authorise an attorney to make certain decisions on your behalf. It is important for any business owner to consider what would happen to their business and the day to day running of it if they were unable to make decisions for example; if you are abroad on holiday or for business or if you have an accident or develop a medical condition that incapacitates you.
In such circumstances, your business may be left vulnerable without someone to act on your behalf resulting in staff wages not being paid on time, third party suppliers not being paid, business loans/mortgages not being serviced and potential contracts lost.
There is a common misconception that LPAs can only be used for personal use. Fortunately, it is possible to make more than one LPA; you should consider making one for your personal affairs and a separate one for your business affairs.
Your chosen attorney(s) will step into your shoes and make essential business decisions on your behalf, should you become unable to do so. This should be a trusted person, who knows you and your business well and understands how you like to make decisions.
You are also able to appoint more than one attorney to act in conjunction with each other. For example, a business associate alongside a family member. The attorneys could be appointed to act jointly in some aspects and separately in others.
Sole Trader - your business is not a separate legal entity. Therefore, appointing an attorney under a business LPA will be an effective way for you to make provision for the continuity of your business, in the event that you are incapacitated.
Partnerships - check the terms of the partnership agreement. Some partnership agreements may already include provision for what would happen should one of the partners become incapacitated.
However, if you're in doubt about the provision or you feel that an LPA may be required, you should seek advice on the wording of the LPA to ensure that it doesn't conflict with the provisions already made in the partnership agreement.
Directors - check the company's articles of association as it could be that they include a provision for the termination of a director's appointment in the event that the director loses capacity.
However, again, if you are in doubt about the wording of the provision or you feel that an LPA may be required, you should seek advice as soon as possible.
What happens if I don't make a business LPA?
If you are unable to make business decisions in the future and have not made a business LPA, an application will need to be made to the Court of Protection for the appointment of a deputy to act on your behalf. The process is expensive, and there is no guarantee that the court will choose someone you would have chosen yourself. It could also take more than six months before a deputy is appointed, during which time your business may be at risk.
It should therefore be part of any business owner's continuity plan and crisis management strategy to consider making a business LPA as soon as possible as it must be registered by the Office of the Public Guardian whilst the Donor still has capacity in order for it to take effect.
For expert advice contact Neelam Maher, Head of Private Client at Wilson Browne Solicitors.