As a business owner, you’ve put your heart and soul into building your company. You’ve overcome countless challenges, made pivotal decisions, and worked tirelessly to see it thrive. But have you ever considered what would happen to your business if you were unable to make crucial decisions? Whether you’re on holiday, traveling for business, or recovering from an accident, or facing a medical condition that incapacitates you, the answer to this question can have significant implications for your business’s future.

In such circumstances, who would authorise payments, sign essential documents, service business loans, or ensure that salaries are paid promptly? Family members, or business colleagues, whilst trusted, might not necessarily be equipped and qualified to assume positions on a company board or to make pivotal decisions concerning your most valuable asset. Relying on the assumption that a family member will step in to make these decisions can leave your business exposed to risks that you never anticipated.  In addition, depending on the type of document or business needs, they may not legally be able to do this on your behalf.

Let’s delve deeper into this intricate matter of Lasting Powers of Attorney (LPAs) and the implications they hold for businesses.

Is a Business LPA Right for You?

A Business LPA is a legal document that designates someone to make crucial business decisions on your behalf when you are unable to do so. It is a valuable tool for business owners in various situations, but its applicability can vary depending on the type of business you own:

  1. Sole Traders: If you operate as a sole trader, your business is typically not a separate legal entity from you. Consequently, appointing an attorney under a Business LPA is an effective way to ensure business continuity in case you become incapacitated.
  2. Partnerships: If you are part of a partnership with multiple partners, it’s important to review your partnership agreement. Some partnership agreements may already include provisions for addressing the incapacitation of one of the partners. If such provisions exist and adequately cover business continuity, a Business LPA might not be necessary. However, if there are doubts or concerns about the partnership agreement, seeking legal advice to ensure the LPA does not conflict with existing provisions is advisable.
  3. Directors of Companies: If you are a company director, it’s crucial to examine your company’s articles of association. Often, these articles provide for the termination of a director’s appointment in the event of incapacity to protect the company’s interests. If your articles of association do not include such provisions, you should consider seeking advice and potentially amending them. In the case of a small private company with a sole director, a Business LPA is often the most appropriate solution.

Can One LPA Cover Both Personal and Business Affairs?

While it’s possible to create a single LPA appointing attorneys to manage both personal and business assets, it may not always be the best approach. Potential conflicts of interest could arise when the same person is responsible for both personal and business decisions. To mitigate this, you could create separate LPAs for personal and business affairs, ensuring clarity in the scope of attorneys’ powers.

By creating two LPAs, you can specify which attorneys have authority over personal and business matters separately. This approach minimises confusion and ensures that attorneys do not encroach on each other’s responsibilities and decisions, thus protecting both your personal and business interests.  Each LPA can also specify the extent of such powers and can be limited as you wish.

The Consequences of Not Having a Business LPA

What if you find yourself unable to make critical business decisions in the future and have not established a Business LPA? In such cases, you may be required to initiate legal proceedings through the Court of Protection to appoint a deputy who can act on your behalf. This process can be costly, time-consuming, and unpredictable, as the court may appoint someone whom you would not have chosen. Moreover, it could take more than six months before a deputy is officially appointed, leaving your business vulnerable and at risk during this period.

To ensure the continued success and security of your business, it’s imperative to make a Business Lasting Power of Attorney part of your business continuity plan and crisis management strategy. By doing so, you not only protect your business legacy but also provide a clear path for its sustained growth and prosperity, even in your absence.

In the ever-changing landscape of business, one thing remains constant: the need for proactive planning and protection. A Business LPA is your shield against the unpredictable, a testament to your commitment to the future of your business, and a safeguard for your hard-earned legacy.