Protect your commercial interests with a business Power of Attorney
27 Sep 2019
If you’re a business owner – be it a sole trader, partner, or director of a company – it’s absolutely essential to plan for the future. Life is unpredictable and unfortunately, no one can know when they might sustain an injury or illness, such as dementia, which renders them unable to run or participate in the business as normal.
Lasting Powers of Attorney (LPAs) are generally used to help individuals protect and manage their personal interests should they lose their mental capacity. However, LPAs can also be used to protect their business interests by appointing a trusted person or people to carry on business activities on your behalf.
What is a Lasting Power of Attorney?
A Lasting Power of Attorney (LPA) is a legal document which authorises one or more people (called Attorneys) to make decisions on your behalf should you lose the mental capacity to decide for yourself sometime in the future.
There are 2 kinds of LPA:
- Property and financial affairs LPA – authorises Attorneys to make decisions about things like….
- Health and welfare LPA – authorises Attorneys to make decisions about things like your care, day-to-day activities and medical treatment
An Attorney can be authorised to act under either or both kinds of LPA.
Why make a Lasting Power of Attorney for your business?
Many people put off making documents such as LPAs, perhaps assuming that they will never need them or feeling it’s morbid to consider the possibility of losing the mental ability to make their own decisions.
However, the reality is no one can foresee the future. If you have an accident or are diagnosed with a condition such as Alzheimer’s, your professional associates won’t necessarily be able to take over your business activities without your express authorisation. It’s therefore crucial to consider matters such as who will step into your position if needed, and whether they are authorised to do so.
Your Attorney can carry on activities such as paying staff, signing cheques, and maintaining business loans, protecting your commercial interests and guaranteeing the future of your business.
You will also save your loved ones and colleagues a great deal of stress. If you lose your mental capacity without a business LPA in place, anyone who wants to act on your behalf will need to go through a lengthy Court of Protection application to become an appointed Deputy.
Do you need a business Lasting Power of Attorney?
Whether a business LPA is right for you will depend on a number of factors, including the type of business you run:
- Sole traders – your business is not a separate legal entity, meaning you’ll likely bear full responsibility for its finances and activities. A business LPA will therefore be particularly useful to ensure the business can continue if you lose the capacity to run it yourself
- Partners – if you own a partnership together with other partners, it’s likely that you will have a partnership agreement which may set out provisions regarding loss of mental capacity. If so, a business LPA may not be needed. In all other situations, it’s beneficial to create one.
- Company directors – directors are bound by their company’s Articles of Association. In many situations, the Articles will allow for a Director to be removed if they lose their mental capacity. However, if you are a sole director and you lose your mental capacity, there will be no one to run the company. In this situation, a business LPA is beneficial to appoint someone to act on your behalf.
Can an Attorney under a business LPA also manage your personal affairs?
Although you can appoint Attorneys under one LPA, it’s typically a better idea to keep your personal and business affairs separate to avoid conflicts of interest.
Instead, it is possible to make 2 LPAs, one to manage your personal affairs and the other, your business affairs. Both documents should be drafted carefully by a solicitor who specialises in this area of law to ensure the scope of the Attorneys’ powers are properly outlined and there can be no confusion or dispute about your wishes.
Get in touch to discuss making a business Lasting Power of Attorney
Are you a sole trader, partner, or director of a company? If so, you could benefit from creating an LPA to protect the interests of your business in the unfortunate event you lose the mental capacity to carry on your responsibilities in the future.
At Harold Benjamin, we provide extensive legal services designed specifically to promote the best interests of your business. Our commercial solicitors can advise on a wide range of issues and challenges, including planning for the continuation of the business should you temporarily or permanently become unable to run it.
Get in touch with our specialist commercial and business law solicitors today by calling your local branch in Harrow or the West End or by emailing us at email@example.com.