Whether you are a business owner, director, partner or sole trader, safeguarding the future of your business makes good business sense, says Sofia Tayton, care and capacity specialist and partner at law firm Lodders.
“As a business owner it is important to consider what might happen to the business if you should be incapacitated by illness or injury, who would take over the running of the business and its financial and property affairs, and what would it mean for your employees’ financial future,” says Sofia, who heads Lodders’ specialist Care & Capacity team, the longest established and one of the largest in the Midlands.
“Whilst there may be ‘an understanding’ amongst your colleagues of what would happen should illness or injury take you away from the business, in the eyes of the law this isn’t sufficient. Unless you have appointed an attorney, fundamental business operations may not be possible – access to bank accounts may be denied, suppliers won’t get paid, contracts could be compromised or lost, insurance premiums won’t be renewed, and salaries could go unpaid. Without an attorney appointed to take care of the business, the disruption to your company could be catastrophic, and it won’t take long for the impact to be felt.
“A business or commercial Lasting Power of Attorney – or LPA – is an important document to tackle this.
You can use an LPA to appoint attorneys to deal with business matters and ensure business continuity in the event of your being unable to work.
“Commercial LPAs are different to normal LPAs that deal with your personal finances and affairs, and represent a vital element of your business continuity planning.
What is an LPA?
“A Lasting Power of Attorney is a legal document which allows you to give another person (your attorney) authority to make decisions on your behalf. There are two types of LPA, one in respect of health and welfare decisions, and one for property and financial affairs.
“A health and welfare LPA will allow your attorney to make welfare and health care decisions on your behalf if you lack the mental capacity to make these decisions yourself.
“A property and financial affairs LPA is the one you need for your business. Once registered with the Office of the Public Guardian, it will allow your attorney to deal with property and finances, and is a flexible document that may be used before the onset of any mental incapacity (if you want it to) as well as lasting beyond.
“If you lose capacity and do not have an LPA, it may become necessary for an application to be made to the Court of Protection for an order appointing someone else to act on your behalf. This can be expensive and time consuming.
“Appointing an attorney via the LPA to deal with property and financial affairs is a useful precaution against future incapacity. If you do not restrict the power, then your attorney can use the document to act at your direction if you are out of the country or physically incapacitated.
Your business LPA
“The first step in preparing a business LPA is a review of the company’s articles of associations, and partnership or shareholder agreements.
“Next you will need to identify a suitable attorney. This should be someone you trust and who you know is capable of doing the job how you want it done, is familiar with the business, and who has a similar outlook and knowledge of the market and business as you.
“Once in place, the LPA will allow your attorney to make financial decisions on your behalf, including buying and selling property, organising property insurance and repairs, accessing bank statements, opening and closing bank accounts, investing assets, and dealing with tax affairs.
“It is possible to appoint more than one attorney, and specify attorneys to act jointly in some matters, but separately in others. For example, a trusted business associate who knows the business could act on your behalf alongside a family member, to negotiate contracts independently of the second attorney, but only access bank accounts with the approval of the second attorney.
“Before your attorney accepts their role, ensure they fully understand the responsibilities. For example they must take out their own personal liability insurance to ensure they are protected whilst acting on your behalf, and commit to follow health and safety regulations and policies too.
“If the worst happens, your business will be in much better shape with an LPA, which makes good business sense and is right for the majority of companies irrespective of size. It should be the cornerstone of an effective business continuity plan.”