A business Lasting Power of Attorney (LPA) specifically differs from a personal LPA. It will be tailored according to your business, and considers its Articles of Association, Shareholder agreement or Partnership agreement.
A business Lasting Power of Attorney (LPA) specifically differs from a personal LPA. It will be tailored according to your business,LPA in place for your business should you subsequently become unable to make decisions due to unavailability. Reasons include holidaying abroad, illness, accident or simply a loss of mental capacity. The power vested in your chosen attorney(s) would allow them to continue running your business, pay salaries to staff, sign cheques, access the business account(s) or even pay bills.
A business can either be run in the capacity as a sole trader, a partnership or even 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 any LPA provisions in place because you are unable to make decisions for any reason, no one will be able to continue to make important business decisions on your behalf.
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 longer able to make decisions. It is advisable to check for this before an LPA is drawn up to prevent any conflict between each document.
Limited Company
If you are a director of a Limited Company, there will be Articles of Association in place which again could contain certain provisions with regards to what should happen if you or another one of your co- directors becomes incapacitated.
Again, you should check this first before making an LPA to ensure each document does not conflict with the other.
How do you Make an LPA for your Business?
You would use an LPA for Property and Financial Affairs, but ensure this LPA only deals with business decisions. For example, “My attorneys only have authority to use my business accounts and make decisions relating to my business. They are not permitted to use my personal account(s) or make decisions about my personal finances.”.
This means that in your personal LPA you would specify “My attorneys only have the authority to use my personal bank account(s). They are not permitted to access my business account(s) or make any decisions relating to my business.”.
This makes it clear where the authority starts and ends for your attorneys. Alternatively, you could have one LPA and say nothing. Provided the LPA does not contain any instructions that restrict the attorney’s power to personal finances only, then they will be able to deal with your personal and business affairs.
Who Should act as an Attorney in your Business LPA?
You may wish to appoint friends or family, but they may not have the expertise, qualifications, or appropriate knowledge to continue making business decisions. Therefore, you could appoint a professional attorney (which will have an associated fee) or a business partner if you feel that this is the right decision. Effectively, this needs to be someone you trust, who understands your business and who shares the same or similar business goals.
It is important that the LPA is registered with the Court while the donor still has the mental capacity to do so.
What Happens if no LPA has been put in Place for your Business?
If you own a business, you lose your ability to make business decisions for some reason and there is no LPA in place, then it is likely the bank will freeze the business accounts which could be disastrous for your business. It also means that the only way forward would be for someone to make an application to the Court of Protection on your behalf and apply for a Deputyship Order. This can take many months and can be very expensive. This also has the impact of there being nobody able to make business decisions during the application process.
How will staff be paid?
How will stock be purchased?
Mental capacity can be lost at any time and could be due to 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. For further details WITHOUT fear of consultation fees or obligation, please visit our Power-of-Attorney page.
TRF Wills (TRF) was created by Michael Cotterill in 2005. He is a member of the Society of Will Writers and registered with the Information Commissioner’s Office.