Most people understand the benefits of a lasting power of attorney, which allows an individual to nominate someone to take decisions on their behalf, if they become incapacitated in some way.
Less well known is the ability to put an LPA in place for a business, which makes a lot of sense in the current health crisis, when the sudden illness of a business owner could have serious ramifications for the business and its workforce, to say nothing of the owner’s livelihood too.
Lack of awareness is typically why business owners do not adopt a business LPA. Without one, the business will have to rely on the Court of Protection to appoint a deputy, which is often a lengthy process.
Being unable to access business bank accounts or make decisions for months could precipitate a quick demise for many businesses, adding to the owner’s problems.
It is often best to have an LPA in place, even if never used, so that it is there should something serious befall the business leader.
The person trusted to step up and run the business can oversee the business bank accounts, and immediately deal with issues such as invoices, wages and tax matters, as well as assessing and signing contracts.
A sensible precaution
As a business owner, if you become unable to make decisions for any reason, it could severely impact on a vast number of people and ultimately the fate of your business.
The benefits of having an LPA in place for your business are therefore apparent; every person your business comes into contact with, from suppliers and creditors to clients and employees, could benefit from you having a trusted individual nominated to keep things running should you become incapacitated for any reason.
The people closest to you can also take peace of mind from knowing that there are measures in place to ensure the continuity of income from the business (from its continued operation) should something happen. Putting a business LPA in place ensures that a person you know and trust will take the reins immediately, and can begin to deal with the usual running of the business without delay or unnecessary costs.
What it can be used for
Once a business LPA is in place, the trusted individual can oversee a range of important business functions and operations on behalf of the business owner, unless restricted on the LPA.
These key business decisions can be made across a range of areas, including:
- Business contracts
- Sale or acquisition of business property
- Paying wages, tax or VAT
- Hiring or removing employees
- Control and management of business assets
- Managing business health and safety issues
For this reason, a distinction should be made in the LPA between running and working within the business, as LPA attorneys can only make decisions as authorised by the donor.
Without this distinction, you may not give adequate permissions to your trusted individual, resulting in the downfall of your business.
As with a personal LPA for financial affairs, a business LPA may be used prior to the donor becoming mentally incapacitated.
Make the arrangements now
A business LPA can be straightforward to organise. A form must be completed and signed by the donor, a ‘certificate provider’ and the chosen attorney. The form is then registered with the Office of the Public Guardian (OPG).
If you arrange a personal LPA alongside a business LPA, then your personal LPA should stipulate that it does not cover your business affairs. Your business LPA must state that your nominated attorney has power only over your business affairs.
The choice of attorney to be appointed requires a lot of careful consideration. It is therefore important to consult an experienced team of legal advisors, who will offer support in making this decision, and the other important factors to consider.
Ultimately, the long-term security of your business and employees are at stake. Without an LPA, you risk jeopardising everything you have worked hard to build over the years.
Extracted from an article by Sarah Nash, FTadviser.com 28 July 2020
If you would like to discuss making a Lasting Power of Attorney for your business please contact Helena Grady at Fogwill & Jones (Legal Services) Limited for advice. Helena is a Solicitor and member of the Society of Trust and Estate Practitioners (STEP) with many years’ experience of advising in this area.
Please note that, although Fogwill & Jones (Legal Services) Limited operate from the same premises as Fogwill & Jones Asset Management Limited they are entirely separate businesses. The only connection is that both are owned by Colin Fogwill. If you are a client of Fogwill & Jones Asset Management Limited you are under no obligation to instruct Fogwill & Jones (Legal Services) Limited and you may choose to instruct alternative legal advisers.