Succession planning for your business is as important as its day-to-day management and for most types of business, one very important aspect of your succession planning are business lasting powers of attorney.
Business lasting powers of attorneys are often overlooked as we often associate being unable to manage our personal affairs with old age, when most business owners would have long ago sold their business and retired.
However, capacity can be suddenly lost due to tragic events such as a serious accident, or a serious illness.
If a sudden traumatic event was to happen you should not assume that a family member or business colleague could gain sufficient authority to manage your business. If you were to lose capacity your bank may freeze the business accounts, contracts may not be renewed/created, wages unpaid, insurances could be invalidated, and breach of regulatory obligations could occur. In extreme cases it could cause your company to go into liquidation and will cause your family and business partners untold upset and stress.
Putting a business lasting powers of attorney (BLPA) in place it allows you to fully consider who would be the best person(s) to manage your business if you were to lose capacity whether for an interim period or indefinitely. It can also be used in situations where you have capacity and for instance something needs to be signed whilst you are on holiday. So, such a document can prove very useful.
A BLPA is the same document and is registered in the same was an individual’s lasting power of attorney. However, it will be tailored to only apply to your business and not your personal financial affairs.
If you would like the same person to manage your business and personal financial affairs you can have one lasting power of attorney covering both. However, this can often result in a conflict of interest and complications, so it is best to have different attorneys. It is important to ensure that advice is sort so that the scope of your lasting powers of attorney are clear to each attorney and your business and personal affairs are protected and managed by the right people who you trust.
If you were to lose capacity without a business lasting power of attorney, then an application would need to be made to the Court of Protection. These applications are costly and take a considerable amount of time and in some cases up to 9 months. That is an extensive period for any business not to have someone who can manage it.
Please do get in touch with our private client team to discuss your business succession planning.