Published on: 28th October 2019

Business Lasting Power of Attorney

A business Lasting Power of Attorney (LPA) specifically differs from personal LPAs because it will be tailored according to the business and considers its articles of association along with shareholder agreements or partnerships agreements.

You can put an LPA in place for your business should you become unable to make decisions due to unavailability i.e. holidaying abroad, illness, accident or due to a loss of capacity. The power vested in your chosen attorney or attorneys would allow them to continue running the business, paying salaries to staff, sign cheques, access the business account or even pay bills. A business is usually run as a sole trader, partnership or a limited company. Let's look at each of these in more detail.

Sole Trader

In this instance, it is likely that the business is owned and therefore controlled by you. If you do not have provisions put in place in the event of loss of capacity or simply because you are unable to make a decision due to illness or injury, no one will be able to continue to make important business decisions on your behalf unless you have an LPA in place.

Partnership

If the business is set up as a partnership, there may be a partnership agreement in place which determines what happens if you are no long able to make decisions. It is advisable to check for this first before an LPA is drawn up to prevent any conflict between the two documents.

Limited Company

If you are a director of a Limited Company, you will have articles of association in place which again could contain certain provisions with regards to what could happen if you or another one of your co-directors becomes incapacitated. You should check this first before making an LPA to ensure both documents do not conflict with one another.

How do you go about making an LPA for your business?

You would use an LPA for Property and Financial Affairs but ensure this LPA only deals with business decisions. This would fit with an LPA for Property and Financial Affairs which covered decisions regarding personal affairs. This makes it clear to your attorneys where the authority starts and ends.

Who should act as an attorney in your LPA?

You may think that you can rely on friends or family but they may not have the relevant knowledge or experience to do so. You can either appoint a professional (which will have an associated fee) or your business partner or another company director if you feel this is the right decision. Effectively, it needs to be someone you trust, who understands your business and shares the same or similar business goals. It is important that the LPA is registered while you, the donor, still have the mental capacity to do so.

What happens if no LPA has been put in place for your business?

Quite simply, if you own a business, lose capacity and there is no LPA in place, it is likely the bank will freeze the business accounts which could be disastrous for your business. It also means the only way forward would be for someone on your behalf to make an application to the Court of Protection and apply for a Deputyship Order. This can take up to 6 months and can be very expensive. This then has the snowball impact of no-one being able to make crucial business decisions during this time frame - for example, how will staff be paid, stock purchased? Capacity can be lost at any time and could be due to either an accident, a stroke or a deteriorating condition so please don't wait until it's too late or your business could be severely disrupted. If you would like to meet one of our Consultants and discuss any of the issues raised in this article or any other Estate Planning topic, please telephone 01732 868190 or click here.

Back to all news