Powers of Attorney for Business Owners

Helping you appoint the people you trust to look after your best interests

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Successful business owners assess and manage risk well.  However, an often overlooked event is the risk of a partner, sole trader or company director unexpectedly losing capacity (even temporarily).  The impact of this can significantly affect the running of a business.  

During the COVID pandemic, we witnessed otherwise young, fit and healthy business owners incapacitated by COVID.  The health issues alone were challenging enough but in some cases, the situation was compounded by the practical difficulties of trying to keep their business operational until they had recovered.  With unprepared business owners, suppliers couldn’t be paid, salaries couldn’t be approved, nobody was authorised to access business bank accounts or sign contracts.  COVID also impacted healthy business owners who found themselves unable to travel back to the UK to make decisions and sign urgent documents.  Next of kin and senior employees do not have the automatic right to take action or make decisions on your behalf, however obvious and uncontroversial those decisions and actions are.

A Lasting Power of Attorney (LPA) is a legal document which allows you to authorise a chosen person to make certain decisions on your behalf.   You can decide, in advance, what they can do and when.

As a business owner, you should create an LPA in relation to your business property and affairs to ensure continuity of your business in the event that you are incapacitated.  Whilst it is possible to have one LPA to deal with both personal and business affairs, in some cases it is more appropriate to limit an attorney’s power to make decisions over your business affairs and create a separate one for personal affairs.  The reason for this is that it is often critical to choose an attorney who is familiar with your business – how it operates, who your preferred suppliers are and who to trust.  The attorney could be a family member, a senior employee or a professional adviser such as an accountant or lawyer.

A business LPA can be as limited as you think appropriate and only permit a named individual(s) to carry out very limited tasks relating to your business if that is your preference.  It would give them no power over your personal affairs (unless you chose to allow that). It is also important to note that the creation of an LPA does not take any power away from you whilst you still have capacity.  An LPA can be used as a tool of convenience, a substitute authority for instance when you are overseas or inconvenienced elsewhere, or a “just in case” tool, only to be used whilst you have lost capacity.

Unless you are a sole trader or the sole director of a small private company, we would advise that prior to creating an LPA for your business, we check provisions in any partnership agreement or your company’s articles of association.  Sometimes those documents dictate what happens in the event that a partner or company director is medically incapacitated.  These provisions are likely to ‘trump’ any LPA created. 

Without a business LPA in place, in the event that you lose capacity, it would be necessary to make an application to the Court of Protection to appoint a deputy on your behalf.  The deputy is chosen by the Court and the process is a slow and expensive one.   

We advise that you consider the creation of an LPA akin to the purchase of a “just in case” insurance policy with a one-off (not annual) fee.  The fee is modest but should provide peace of mind to you, your family and your employees. 

Revoking an LPA is as simple as sending the original LPA and a prescribed statement to the Office of the Public Guardian.

Due to an overwhelming increase in applications, the Office of the Public Guardian are currently taking approximately 20 weeks to register an LPA.  Our advice is therefore to act now.  It is never too early to plan for your future.

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