If you have a business or businesses, have you considered what would happen if you were to lose capacity?
A business LPA differs from personal LPA’s because it will be tailored according to the business and considers its articles of association along with shareholder agreements or partnerships agreements.
You can put an LPA in place for your business should you become unable to make decisions due to unavailability i.e. holidaying abroad, illness, accident or simply due to a loss of capacity. The power vested in your chosen attorney would allow them to continue running the business, paying salaries to staff, sign cheques, access the business account or even pay bills.
A business can either be run in the capacity as a sole trader, partnership or even a limited company. Let’s look at each of these in more detail.
Sole Trader
In this instance, it is likely that the business is owned and therefore controlled by you. If you do not have provisions put in place in the event of loss of capacity or simply because you are unable to make a decision due to illness or injury, no one will be able to continue to make important business decisions on your behalf unless you have an LPA in place.
Partnership
If the business is set up as a partnership, there may be a partnership agreement in place which determines what happens if you are no long able to make decisions. It is advisable to check for this first before an LPA is drawn up first to prevent any conflict between the 2 documents.
Limited Company
If you are a director of a Limited Company, you will have articles of association in place which again could contain certain provisions with regards to what could happen if you or another one of you co- directors becomes incapacitated.
How do you go about making an LPA for your business?
You would have an LPA for Property and Financial Affairs but ensure this LPA is limited to business decisions only so, for example,
“My attorneys only have the authority to use my business accounts and make decisions relating to my business. They are not permitted to use my personal account or make decisions about my personal finances.”
In your personal LPA you would specify
“My attorneys only have the authority to use my personal bank account. They are not permitted to access my business account or make any decisions relating to my business.”
This makes it clear to your attorneys where the authority starts and ends.
Who should act as an attorney in your LPA?
A family member or friend may not have the expertise knowledge to continue making business decisions, so you can either appoint a professional (which will have an associated fee) or even your business partner if you feel this is the right decision. Effectively, it needs to be someone you trust, understands your business and shares the same or similar business goals.
What happens if no LPA has been put in place for your business?
If you own a business, lose capacity and there is no LPA in place, it is likely the bank will freeze the business accounts. It also means the only way forward would be for someone on your behalf to make an application to the Court of Protection and apply for a Deputyship Order. This can take up to 6 months and can be very expensive. This then has the snowball impact of no-one being able to make crucial business decisions during this time frame – how will staff be paid, stock purchased?
Capacity can be lost at any time and could be due to either an accident, a stroke or a deteriorating condition so please don’t wait until it’s too late or your business could be severely disrupted.
Did you know?
- There is no such thing as a business LPA
- There can be restrictions in articles of association or shareholders agreement as to who can be an attorney so this should be checked first before the LPA is drawn up/
- If you want the same attorneys to make decisions relating to your business and personal affairs, only 1 property and financial affairs LPA is needed and no specific wording is required.
If you would like to find out more information regarding making a Lasting Power of Attorney for your business, please contact one of our members.
