Have you considered what would happen to your business if you were unable to make the day to day decisions? Do you have somebody authorised to run payroll, sign contracts or pay your suppliers on your behalf?
If not and these processes aren’t able to go ahead, this could cause your business serious financial and reputational harm. The purpose of this article is to find out what steps you can take to help your business, when you’re not able to take the helm.
Topics to be answered in this article
What is a business Lasting Power of Attorney?
A Business Lasting Power of Attorney (LPA) is a document that you can prepare that sets out who is able to make decisions regarding your business dealings on your behalf if you are unable to make those decisions yourself. This may be because you are overseas and are unable to make a decision that requires your physical presence (physical incapacity) or if you were in an accident or suffer from a medical condition which would impair your ability to make decisions (mental incapacity).
Without taking these steps, if you were to lose capacity, it would be down to somebody to make an application to the Court of Protection to manage your affairs on your behalf. This can be very costly and time consuming at an already difficult time.
Who needs a business Lasting Power of Attorney?
If you are a sole trader, your business is not a separate legal entity to you. In this scenario, a Business LPA would be an effective tool to ensure that decisions are still made on your behalf if you are unable to make them yourself.
If you are a member of a partnership, it would be important to first look at the partnership agreement in place to see what provisions, if any, are made in the event of incapacity of a member of the partnership. It may be the case that the partnership agreement adequately protects your business in this event. Either way, professional advice should be sought.
If you are a director of a limited company where there are multiple directors, the Articles of Association of a company often provide that a director’s appointment is terminated if they should lose capacity. In such a situation, a Business LPA is unlikely to be an effective tool.
If you are the sole director of a small limited company, it’s unlikely that an automatic termination can arise in the event of incapacity. This is because there would then be nobody able to make decisions on behalf of the company. A Business LPA would be appropriate in this case to ensure continuity of your business.
The legal framework
A Business LPA falls under the same legal framework as any other LPA. The difference between a Business LPA and a standard LPA for Property & Financial Affairs is simply that a restriction is entered into a Business LPA that limits the authority given to the attorneys to only make decisions in relation to your business dealings.
It is crucial to think about whether any attorneys you have appointed under a standard LPA for Property & Financial Affairs would have the necessary expertise and insight to run your business on your behalf. It may be the case that you wish to make one LPA appointing attorneys to manage your personal finances with a separate LPA appointing attorneys to manage your business dealings.
An LPA will need to be registered with the Office of the Public Guardian before it can be used.
The process of creating a business Lasting Power of Attorney
The first step to consider when making a Business LPA, is whether or not it is an appropriate and effective tool given the circumstances of your business. If it will be effective, you must consider who you wish to appoint as your attorneys, ensuring that they are people you trust to make the correct decisions for your business.
The documents will then need to be prepared and executed correctly. You will need a certificate provider, who is somebody that signs the document to confirm that you have full knowledge and understanding of it. Once all parties have signed the document, it will be sent to the Office of the Public Guardian for registration. This process can take around 16 to 20 weeks and is currently subject to a registration fee of £82 per document.
When does a business Lasting Power of Attorney come into effect?
There are a couple of choices that you can make when deciding when a Business LPA can be used.
Firstly, you can decide that the document can be used as soon as it is registered and even if you have mental capacity. If you choose this option, the attorneys can only make decisions with your consent. This can be a useful option to take as it would allow your attorneys to make decisions on your behalf if you were perhaps overseas and required them to sign a form that you are unable to sign.
Alternatively, you can state in the document that it can only be used if it is registered, and you do not have mental capacity. This can make the document more rigid and specialist advice should be sought when considering when your attorneys can act.
How can Goughs help?
A Business LPA can be a very useful planning tool to ensure that your business doesn’t suffer if you become incapacitated. The harm that can befall a business when decision making grinds to a halt can be fatal. Here at Goughs we can provide you with the specialist advice needed to look after you and your business should the worst happen. Contact our team today to see how we can help.
