Business Lasting Power of Attorney – Do I Need One?
Risk management is an important part of all businesses, whether it is assessing and mitigating the risks of cyber-crime or data breaches, or taking steps to ensure the continuity of the business following the death of an owner. What most businesses do not account for, however, is an owner losing mental capacity and subsequently losing the ability to make decisions for themselves.
A loss of mental capacity does not always come with old age. It can happen at any time, for instance due to accident or illness, and is often completely unforeseen.
By having a Business Lasting Power of Attorney in place, the problems arising from this situation can easily be avoided.
A Lasting Power of Attorney is a legal document which appoints another person or persons (known as attorneys) to act and make decisions on your behalf in the event that you become incapacitated through accident or illness.
What are the three types of Lasting Power of Attorney?
- A Lasting Power of Attorney for your personal property and financial affairs
- A Lasting Power of Attorney for your personal health and welfare
- A Lasting Power of Attorney for your business property and financial affairs
What is a Business Lasting Power of Attorney?
A Business Lasting Power of Attorney appoints an attorney or attorneys to act on a person’s behalf and to make decisions relating to that person’s business affairs in the event of a loss of mental capacity.
These decisions can include managing the business bank accounts, which would otherwise become frozen in the event that a sole account holder became incapacitated, enforcing ongoing contracts, and dealing with professional bodies, such as accountants and government bodies.
I’m a business owner, do I need a Business Lasting Power of Attorney?
It is appropriate to consider making a Business Lasting Power of Attorney if you are:
- A sole trader
- A company director
- A partner in a partnership
We will advise on whether any articles of association and/or partnership agreement need to be reviewed should the documents not provide for a director or partner losing mental capacity.
What if I already have a Lasting Power of Attorney for my property and financial affairs?
A person can have both a personal Lasting Power of Attorney for property and finances, together with a Lasting Power of Attorney for business property and finances. Quite often, these documents will appoint different attorneys to act on a person’s behalf, as an attorney appointed under a personal Lasting Power of Attorney may not be a suitable attorney to deal with a person’s business affairs. Likewise, a business attorney may not be appropriate to handle a person’s personal property and finances.
If you have already made a Lasting Power of Attorney for your personal property and financial affairs, we recommend that you contact us for an initial chat to discuss making a business Lasting Power of Attorney. We can advise you on whether any powers granted to your proposed business attorney conflict with any powers given to an attorney under your personal Lasting Power of Attorney.
Choosing your attorneys
It is important that your attorneys are trustworthy, reliable and ideally familiar with your business affairs. Additionally, your attorneys should have the requisite skills and ability to carry out your own duties in the business.
Consequences of not having a Business Lasting Power of Attorney
In the event that a business owner loses capacity without a Lasting Power of Attorney in place, an application will need to be made to the Court of Protection to appoint another person (known as a Deputy) to act on your behalf. Not only is this expensive, it can place an emotional burden on the applicant, and can take several months to be resolved. During this time, there may not be anybody else available to manage the business affairs, and can place the business at considerable risk of failure. For sole traders and businesses where there is only one signatory on the business bank account, there may be no other person authorised to meet payments to creditors and employees.
How can we help?
For more information, or if you are unsure whether a Business Lasting Power of Attorney is right for you, contact Sarah Husbands on 01743 237712 or firstname.lastname@example.org) in our Wills, Trusts & Probate team, or contact any of our offices in Shrewsbury 01743 248545, Harlescott 01743 467641 or Whitchurch 01948 663361.