What is a Business LPA?
A Lasting Power of Attorney (LPA) is a legal document which gives someone else the authority to deal with your affairs and make decisions on your behalf if you lose mental capacity or are temporarily unavailable to act.
While many people are familiar with the concept of having a Financial LPA in place to manage their personal finances, it is often advisable to also consider making a Business LPA (BLPA) specifically to protect your commercial interests.
To avoid confusion, each of your LPAs should contain specific instructions setting out the parameters of your attorneys’ powers.
Why should I make a Business LPA?
A BLPA can play a critical role in ensuring business survival should something happen to you. Without one, there may be no certainty that your business would be able to continue operating in the same way.
Contrary to what you might think, with no appropriate arrangements in place for incapacity, your partner, spouse or children would not automatically be able to step in to manage your business affairs (or any of your business partners). This could severely impact the day-to-day running of your business and, with no one who could lawfully make financial decisions on your behalf, quickly lead to significant issues such as lack of access to company accounts and an inability to sign off contracts or authorise payments to employees and suppliers.
The only option would be for your next of kin/business partner to make an application to the Court of Protection to appoint a deputy. However, this is a lengthy and expensive process during which time the business’ bank accounts may be frozen.
BLPAs should, therefore, be viewed as a key part of a business’ risk management framework.
Do I need a Business LPA if I already have a Financial LPA?
An existing Financial LPA can certainly be used in relation to your business matters, but you should consider whether it is appropriate and practicable for the same person to make both personal financial and business decisions on your behalf. For example, your spouse may not have the necessary expertise and relevant skills to take over the running of your business.
There may also be a conflict of interest between your business and non-business affairs (what is ‘best for the business’ might not be ‘best for family’) which might mean it is sensible to appoint a different independent attorney for each role.
Who should I choose to be my attorney?
There are a number of things to consider when choosing who to appoint as your BLPA attorney(s). A BLPA attorney’s responsibilities can be varied, ranging from contractual obligations to tax and insurance matters. They therefore need to be similarly qualified and ideally already familiar with the business concerned. The role is potentially a time-consuming one and so, as well as being someone trustworthy and reliable, they need to have the available time or perhaps be paid for their time.
What do I need to consider?
In particular, you should seek legal advice if you are a shareholder or director in a company, or a partner in a partnership, to ensure that the wording of your LPAs does not conflict with any provisions relating to incapacity in your business’ partnership agreement, shareholder agreement or articles of association, which could prove to be problematic.
Business contingency planning for unexpected incapacity is essential and often overlooked. Putting a BLPA in place often reduces risk and can be key to ensuring business continuity in the event that you are no longer able to make decisions yourself.
If you would like to discuss any of the above in more detail, please get in touch with a member of the Fladgate Private Client team.
