Have you considered what would happen to your business if you were to lose the ability to make decisions?
A Business Lasting Power of Attorney (LPA) differs from a personal LPA as it’s specifically tailored to your business, taking into account its articles of association, shareholder agreements, or partnership contracts.
Setting up a Business LPA ensures that if you become unable to make decisions—whether due to illness, accident, unavailability (such as being abroad), or a loss of capacity—your designated attorney can continue managing the business. This includes tasks like paying staff, signing checks, accessing business accounts, and settling bills.
Businesses can operate in various forms, including sole traders, partnerships, or limited companies. Let’s explore what a Business LPA means for each:
Sole Trader
As a sole trader, you own and control your business. Without an LPA in place, if you lose capacity or are otherwise unable to make decisions, no one will have the legal authority to manage your business unless you’ve appointed an attorney.
Partnership
In a partnership, a partnership agreement may outline what happens if one partner becomes incapacitated. It’s essential to check for any existing provisions before setting up a Business LPA to avoid conflicts between documents.
Limited Company
If you’re a director of a limited company, the articles of association may include provisions for what happens if you or another director loses capacity. These should be reviewed before drafting your Business LPA.
How Do You Create a Business LPA?
You can create an LPA for Property and Financial Affairs, but it should be limited to business decisions. For example:
“My attorneys are only authorized to use my business accounts and make decisions related to my business. They are not permitted to access my personal accounts or make personal financial decisions.”
In your personal LPA, you would specify:
“My attorneys can only use my personal bank account. They are not allowed to access my business accounts or make decisions regarding my business.”
This separation of authority ensures that your attorneys clearly understand their roles and responsibilities.
Who Should Act as an Attorney for Your Business LPA?
While a family member or friend might seem like a natural choice, they may lack the expertise to handle business decisions. You could instead appoint a professional (though there may be fees involved) or even a trusted business partner who understands your business and shares your goals.
What Happens if You Don’t Have a Business LPA?
If you lose capacity and don’t have a Business LPA in place, your business accounts may be frozen by the bank. Someone would need to apply to the Court of Protection for a Deputyship Order, which could take up to six months and incur significant costs. During this time, crucial business decisions—such as paying employees or ordering stock—cannot be made, potentially causing severe disruption.
Why It’s Important to Act Now
Capacity can be lost unexpectedly due to accidents, strokes, or deteriorating health conditions. It’s essential to have an LPA in place before it’s too late to ensure your business can continue to function smoothly.
Did You Know?
- There is no official “Business LPA,” but you can create one for your business through careful wording.
- Articles of association or shareholder agreements may have restrictions on who can act as an attorney, so these should be reviewed before drafting your LPA.
- If you want the same attorney to manage both your business and personal affairs, you only need one Property and Financial Affairs LPA—no special wording is required.
If you’d like to learn more about setting up a Lasting Power of Attorney for your business, please get in touch with one of our team members. www.keily.legal