Ola Szymaniec, a Solicitor in our Private Client team in our Wimbledon office, provides an overview on how making a business Lasting Power of Attorney (LPA) can assist you and your business.
What is a Lasting Power of Attorney?
A Lasting Power of Attorney (LPA) is a document that lets you appoint one or more people to help you with making decisions about your property, finances, health and welfare.
The key with LPAs is that they remain valid even if you were to lose capacity; that is, the ability to make decisions. When someone loses mental capacity, the banks will freeze their accounts to protect them. Therefore, only someone who is appointed an attorney under an LPA can access that account.
If you have an Enduring Power of Attorney (EPA), it is worth having this reviewed to ensure that it still meets your needs. The EPA needs to be registered at the point of someone losing capacity and may be less flexible than you would need it to be.
How Does a Business LPA Differ from a Regular LPA?
If you are a business owner, depending on the type of business you own, there may be certain activities that only you can do. If you lose capacity, or you are prevented from acting because you are in a different country or unable to travel, this may have negative consequences for your business.
The three main types of business owners are:
- Sole traders
- Partners in a partnership
- Directors of a company
If you are a sole trader, it is likely that the business assets are all in your name and controlled by you. Legally speaking, the business does not have its own entity. Therefore, if you were to lose capacity, the business may not be able to carry on if it is your signature or authority that is needed to make payments, approve the payroll, or sell assets. This would then have the knock-on effect of your business being unable to trade and there may be potential reputational damage to your business.
Making a business LPA that appoints an individual or a group of people who would have the authority to carry out these activities would enable your business to carry on if you lost capacity. It is important to have these bespoke LPAs drafted up professionally so that you achieve what you need.
Where you may be a partner in a partnership, you will need to look at the partnership agreement that is already in place. Your partnership agreement may already cover what happens in the event of a partner losing capacity.
If you are unsure of what the provisions in your partnership agreement say or whether you feel that the current provisions are adequate, it is sensible to have this reviewed. Moreover, if you already have an LPA, it is advisable to review whether the wording in the LPA is sufficient to cover your business activities.
Finally, if you are a director of a company, you will need to check the articles of associations. It may be that the articles cover the topic of loss of capacity already, but again, it is advisable to review the articles of associations. If you are a director of a small company, there may not be provisions in place to ensure the continuity of your business and then a business LPA would be crucial.
Final Considerations
You may already have an LPA in place to cover your personal financial affairs. However, if you own a business, you may want to consider whether your current LPA meets your business needs. Do your current attorneys understand your business needs? Would they want to have the authority to run your business if you were unable to? Do your current attorneys have the correct skill set to carry on your business?
If you are partner or a director of a company, you need to consider reviewing any current partnership agreement or articles of association. You may need to get the consent of other shareholders or directors and you should take legal advice to ensure that your business LPA does not conflict with those agreements.
If you do not put a Lasting Power of Attorney in place, it may be that your next of kin will need to apply to the Court of Protection to access your assets. This is a costly process and can take between 6 months to 1 year for the court to grant access to any assets.
The act of putting a business Lasting Power of Attorney in place ensures that, with the correct professional advice, your business has a back-up plan if something were to happen to you.
At Morr & Co, we can provide holistic advice about what would happen to your business in your particular circumstances so please don’t hesitate to get in touch.