Lasting Powers of Attorney offer huge benefits to individuals, but their advantages are often forgotten when it comes to businesses.
A Lasting Power of Attorney (LPA) allows someone to appoint a trusted representative to act on their behalf once they lose the capacity to do so. This can be in respect of their property and financial affairs or their health and welfare.
Similarly, if you are a business owner, you can put a business LPA in place that will appoint someone to run your business for you in the event that you become unable to.
In the event that you lose the ability to deal with your business affairs, it could cause extensive problems. For example, if no-one can access funds except you, your business could be unable to pay suppliers or staff and any bank accounts could be frozen.
With no-one able to make decisions, the business could effectively come to an end. Although it is possible to apply to the Court of Protection for an LPA, by the time this has been done, usually several months, irreparable damage is likely to have been caused. In addition, the appointment made by the Court of Protection might not be of someone you would have chosen yourself.
Appointing an attorney under a business LPA
You should choose someone who you believe could carry out your role in the business without difficulty. This may well be a different person to the family member or trusted friend whom you have chosen to act in respect of your personal financial affairs if they are unlikely to understand the intricacies of your business.
You can put together detailed instructions on what powers you want to give your attorney and when they can use the powers. It is possible to register and use a business LPA straight away if you choose to.
For example, it is possible to appoint someone to act on your behalf while you are away, as well as in the future if you become incapacitated or if you are temporarily incapacitated.
You therefore have the scope to limit the powers you give to a single transaction or a single aspect of the business, while you are still able to manage your affairs yourself.
You can specify non-binding preferences, telling your attorney how you would like them to act, although they will not be legally required to follow any non-binding directions.
If you have several business interests, you would usually make a separate business LPA for each one, appointing the most suitable person in each case.
Which type of business is a business LPA suitable for?
An LPA works well for a sole trader and also for a partnership where there is no provision for incapacity in the partnership agreement.
Similarly, if you are a company director and the company’s articles of association do not include any information about what is to happen in the event of incapacity, you can put a business LPA in place.
It is advisable to seek legal advice in respect of a business LPA before executing one, to ensure it does not conflict with any existing regulations your business may have.
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