How protected is your business if something happens to you? – LPA
Have you considered a business Lasting Power of Attorney (LPA)?
Do you run your own business? Are you a sole trader? Or a Partner perhaps? In the unfortunate event that you can no longer work because of an illness or injury, have you considered what will happen to your business? If not, you are probably not alone, but this is something that you should give some serious thought to in order to protect your business ensuring its continuity. A Lasting Power of Attorney (LPA) for your business could be the safeguard you need.
A Lasting Power of Attorney is a legal document used frequently by individuals to give an appointed attorney or attorneys the authority to make decisions on their behalf. These decisions normally relate to personal finances and health and welfare. However, you can also have an Lasting Power of Attorney that deals with your business decisions and its running in your absence. These Lasting Power of Attorneys are referred to by different names such as Business LPAs, Finance LPAs or Commercial LPAs. In this article we refer to them as business Lasting Power of Attorneys.
What is a Lasting Power of Attorney?
Running a business and making it a success is no easy feat. When you have invested an unprecedented amount of time and considerable expense, the growth and continuity of your business is high on your list of priorities.
So if something unfortunate was to happen to you and you were to become injured or unwell how would your business carry on whilst you recovered? Whilst there may be an understanding or strategy in place between you and senior management or other colleagues of what will happen, from a legal point of view this is not going to be sufficient.
Essential business operations may not be possible without a business Lasting Power of Attorney. One major hindrance could be the inability to access bank accounts. This in turn may mean that any employees you have and your suppliers will not get paid. This could impact on your existing contracts affecting your business relationships and reputation and may impact on your ability to obtain new clients and contracts in the future.
Having a business LPA could minimise a disastrous impact on your business by ensuring that someone you trust can take over the running of your business with the requisite authority to make decisions dealing with the business’ finances and property whilst you are incapacitated.
Practical points to consider before making a business Lasting Power of Attorney:
1. Ask yourself whether your business is currently protected if you become incapacitated and unable to make decisions.
2. Check your articles of associations or partnership agreements (if you have these) to see if there are provisions already in place there or whether these documents preclude you from creating a business LPA.
3. Think about who you want to appoint as your attorney or attorneys. This has to be someone you trust who will have the competence to run your business with the same goals and objectives that you have.
4. Speak to your chosen attorney(s) making sure they are happy to take on this responsibility and understand the full extent of the same.
A business Lasting Power of Attorney can be used (with your permission) as soon as it is registered with the Office of the Public Guardian. Its use can also be delayed and ‘kick in’ once you lose either physical or mental capacity or both. You can end or change your business LPA if you retire or sell your business even if the LPA has been registered, as long as you still have mental capacity at the time of making the revocation or change. A business LPA will automatically end on your death.
Without a business LPA in place, if you were to lose capacity and wanted to achieve similar objectives that an LPA allows, a deputy would need to be appointed by the Court of Protection. Whilst your deputy will also be able to ‘step into your shoes’ like an attorney would, appointing a deputy is not a swift process. It will take time filling in the necessary forms and waiting for the court to approve the deputy’s appointment. In the business world, time is a precious resource and your business could be negatively impacted in the interim period of waiting for a deputy to be appointed.
As part of your business continuity plan, consider whether making a business Lasting Power of Attorney is right for you and your business. It is far easier to invest in one now despite you being in good health than your loved ones and/or colleagues struggling to run and manage your business if you later, perhaps unexpectedly, become unwell.
In our article 5 key questions on Lasting Powers of Attorney answered you can find further information.
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Jigna Vekaria, Solicitor
Please note that the information contained in this article was correct at the time of writing. There may have been updates to the law since the article was written, which may affect the information and advice given therein.