Have you ever considered what would happen to your business if you were incapable of making decisions? As a business owner, it is important to consider what would happen if you were unable to make decisions. Have you ever considered the following:
- What would happen if you were to become incapacitated through illness or injury?
- Would someone be able to take over the running of the business or would it come to a complete standstill?
- What implications would this have on the business?
- Could the business function without control?
These are all valid questions and unfortunately, often asked too late. As a result, the implications could have a detrimental effect on the day to day running of the business, which comes with a whole host of problems. Assuming that simple actions such as paying bills, signing cheques and paying salaries can continue by a family member or colleague could all leave the business exposed to risk. If there is no Business, Lasting Power of Attorney in place, no one would have the legal authority to make decisions or manage the finances of the business. Do not assume authority will pass to a business colleague or family member, as this could leave your business exposed.
What is a Business LPA?
This is a legal document that will allow you (the ‘donor’) to appoint one or more persons (known as ‘attorneys’) to help you make decisions or to make decision on your behalf when you are unable to do so.
Does my business require a Business LPA?
Whilst a business LPA will be appropriate in most circumstances, it is important to first consider the type of business you own.
Sole Trader
Although an individual runs their own business as a sole trader a Business LPA would be useful in distinguishing between personal and business assets. This will ensure that the attorney can maximise the stability of the business.
Partnerships
There should already be a partnership agreement in place and the terms of such document must be considered carefully before drafting a Business LPA. This will ensure there is no conflict between the two documents. A well-drafted partnership agreement should provide for the incapacity of a Partner. However, in the absence of clarity a Business LPA may be essential.
Limited Companies
Similarly, the Articles of Association of a Limited Company should specify what would happen in the event of incapacity. For example: If a Director of a limited company becomes mentally incapable of acting as a Director, they should be removed from office. If the Articles do not make reference to such circumstances then a Business LPA could provide clarity as to what should happen in this situation.
As discussed above, a Business LPA should be seen as a contingency plan and is an essential tool in every business. Having a Business LPA in place would take care of all of these issues providing peace of mind.
Appointment of an Attorney for a Business LPA
Serious consideration should be given to the proposed attorney, ideally the person appointed must understand the business and have the necessary expertise to step into the business owners shoes. More than one attorney may be required for specific roles for example: one to deal with the running of the business and one to deal with accounts.
It is essential that the donor trusts the appointed attorney and they have clear instructions on what is expected of them. The attorneys responsibilities are to act in the best interests of the attorney.
What happens if there is no Business LPA in place?
If capacity is lost and there is no Business LPA in place it may become necessary to make an application to the Court of Protection for them to appoint a deputy to act on your behalf. The process is lengthy and costly with no guarantee that the Court will choose someone you would have chosen given the choice. The application can take more than six months to appoint a deputy which could cause significant disruption to the business. We would therefore strongly recommend that you consider making a Business LPA if you have no continuity plan in place.
For more information and advice on Lasting Powers of Attorney in Oldham, please contact a member of our Private Client team. North Ainley, as a trusted solicitor can provide the guidance you need to protect your business and personal interests.
