The majority of people have heard of a Lasting Power of Attorney (LPA) for the purposes of looking after their personal affairs. However, LPA’s for business are less well known.
Rebecca O’Donnell explains the main benefits of business LPA’s and why business owners ought to consider them.
What is a Business LPA?
Much like LPA’s for personal affairs, business LPA’s allow a nominated individual / individuals to manage a business’ finances should the business owner / Director be unable to do so themselves.
Business LPA’s are suitable for all business owners, be they sole traders, partners or company Directors.
The reasons in which a business LPA may come into play include:
- If the business owner develops a medical condition that means they no longer have the capacity to act
- If the business owner has an accident and becomes temporarily unable to make commercial decisions
- If the business owner is abroad and is therefore not on-site to be able to sign off on important matters
If any of these circumstances occur, the bank would take action fairly quickly and the business’ accounts could be frozen. The consequences of this for a business may be far reaching – with no one having access to funds to pay bills, wages etc, business activity could quickly grind to a halt.
It is a common misconception that family members or employees would automatically be able to deal with the running of the business should the business owner(s) no longer be able to. However, they may not have the authority to do this and under company law, business colleagues do not automatically gain the authority to make decisions on your behalf.
Without a Lasting Power of Attorney, an application to the Court of Protection to appoint a deputy to act may be needed. This can prove to be a costly and time-consuming process.
With a Business Lasting Power of Attorney in place, it’s possible to appoint somebody that you trust and who understands your business to take over the reigns as soon as they are required, with minimal disruption or delay to staff, customers or everyday business operations.
Do I need a Business LPA as well as personal ones?
A business owner may already have LPA’s in place for their personal financial affairs as well as their health and welfare. However, in the majority of cases, the attorneys that have been assigned in these circumstances would not necessarily be suitable for managing the affairs of a business. In any event, having the same person dealing with both your personal and business affairs could create a conflict of interest that may render the LPA ineffective.
Choosing who to appoint in an LPA is an important decision that should be carefully thought out, with each attorneys being suitable for the specific purpose of the LPA.
For further advice or assistance on Lasting Powers of Attorney, or to seek advice in this area in relation to yourself or your business, please contact Rebecca on 01457 761320 or email Rebecca@odonnellsolicitors.co.uk.
Rebecca O’Donnell is Head of Private Client at O’Donnell Solicitors.