INSIGHT
If you are a business owner, we highly recommend making a business lasting power of attorney (LPA). An LPA will form part of your business continuity and crisis management plan, and will specifically focus on your business interests.
An LPA ensures that your attorney(s) have access to your company accounts. It means they have the power to sign key documents, should you find yourself in a position where you are unable to act physically or make sound business-related decisions for yourself. Once power is passed to the lasting power of attorney, you become the ‘donor’.
The LPA will come into effect as soon as it is registered. However, it can be restricted to only come into operation if you are declared to have lost your decision-making ability under the Mental Capacity Act. For example, if you were to suffer from a condition including:
When you arrange a LPA, you can specify the exact matters that your attorney(s) will be allowed to make decisions about. This enables you to assign someone specifically to take care of business matters, keeping them separate from the rest of your personal finances and property if you wish.
Under a business LPA, your attorney could decide whether to:
Should you lose mental capacity without a lasting power of attorney in place, the Court of Protection will have the authority to appoint a deputy to make decisions about your affairs. The deputy appointed by the court may not necessarily be the person you would have chosen to take control of your affairs.
Although it is possible for your next of kin to apply to the Court of Protection to appoint a specific deputy, it is a more expensive process than creating and registering a LPA, and is likely to take around a year to be approved by the court
In the worst-case scenario, the company may have to cease trading. Other consequences could include the company removing you as a director or shareholder, or its bank accounts being frozen.
The implementation of a lasting power of attorney is determined by the type of business and its structure.
A business LPA for a sole trader is relatively straightforward, because as a sole trader there is not a separate legal entity for the business. Appointing an attorney under a business LPA will effectively provide for the continuity of your business, in the event of your incapacitation.
If you are one of a number of directors of a business, including a limited company, your ability to take care of your directorial decision-making will depend upon the company’s articles of association. Sometimes, the articles specify that a director who loses capacity will automatically have their appointment terminated.
If the articles of association do not account for this, you may be able to use a lasting power of attorney to preserve your decision-making within the company’s operations, although a director cannot delegate all their duties to an attorney. You should seek legal advice before implementing this.
For the sole director of a business, the articles of association would be unlikely to simply terminate your director’s appointment, as this would create a situation where no one would be left to run the company. Therefore, a business LPA is highly recommended for directors in this position.
Within a business partnership, the terms of the partnership agreement will determine what happens if one of the partners is unable to perform their duties. If this provision is included in the partnership agreement, it might stipulate what is to happen and how the business would continue to operate.
However, if you believe the partnership agreement does not adequately protect the continuation of the business, or you are unsure about the provisions, you should seek legal advice.
When you create lasting powers of attorney, all attorneys should be individuals that you consider trustworthy to make decisions that would be in your best interests.
For your business affairs, this should be someone with sufficient understanding of general business workings and perhaps related work experience.
Lasting powers of attorney are created by the completion of a specific legal form in a strict order. The documents must then be registered with the Office of the Public Guardian before they can be used. The registration process can then take up to 20 weeks.
Due to the complexity and multiple considerations for this process, we recommend you seek professional advice.
The practitioners in our Wills, Probate, Tax & Trusts team have extensive experience in lasting power of attorney applications, including for clients who run or own businesses.
No matter where your business is based or its directorial structure, speak to our team for advice on succession planning.
BUSINESS LASTING POWERS OF ATTORNEY
Yes. However, another director of the same company taking on the decision-making could create a conflict of interests. The decisions they make could be influenced by their own business ambitions.
There are mechanisms to have an attorney removed if they abuse their position or do not perform adequately.
If the donor has mental capacity at the time, they can initiate the removal themselves. Alternatively, a third party may take issue with the attorney (believing that the attorney’s actions are not in the donor’s interests). In this case, they can approach the Office of the Public Guardian to investigate their concerns.
The donor of a lasting power of attorney can remove, appoint or change the permissions of their attorneys at any time whilst they have mental capacity. Adding a new attorney will require a new application to be made.
It is possible to apply for a lasting power of attorney independently. This is unadvised, though, as the scope of the attorney’s decision-making parameters must be specifically set out in writing. It is best to consult a legal expert with experience of LPA applications.
CONTACT US
To protect your business with lasting powers of attorney, contact our team team on 01332 226 162 or fill in the form below.
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