The importance of a Power of Attorney (Business)

A Lasting Power of Attorney (LPA) is a legal document that enables one person (the Donor) to appoint a maximum of four other people (the Attorneys) to act on their behalf when they require assistance.

There are two types of LPA available- one relating to property and financial affairs and one relating to health and welfare decisions. 

For further information as to what an LPA is and the difference between the two types of LPA please see our leaflet/article titled “Should I make a Lasting Power of Attorney?”

Many people associate LPAs with those who are incapacitated and the elderly as they are often incredibly important for those, for example, suffering from dementia so that their affairs can be managed on their behalf. However, if you are a sole trader, a director of a company or in a partnership an LPA could prove very useful in situations where you are unable to make your own decisions. It is possible that a partnership agreement or articles of association make provision for a situation where a partner or director loses capacity and therefore the terms should be checked to ensure that any LPA does not conflict.

Although a lack of mental capacity is often associated with the elderly, sadly the situation can  arise for those who are much younger, whether that be from a medical condition or from some form of accident. Aside from mental capacity, there may be a physical reason why you would be unable to make decisions regarding your business or deal wth certain business matters such as if you were out of the country. In these situations it would be imperative that your business can continue to run smoothly with minimal disruption, whether that be the payment of bills and salaries, dealing with the bank with regard to any loans, dealing with insurers, dealing with tax matters or ensuring that any important contracts are not compromised for example.

Although the LPA can be used as soon as it has been registered, you do have the option of ensuring that it is only useable if you no longer have capacity. This may be useful if, for example, you are out of the country for some time but still intend to make decisions with regard to your business.

It is possible that you may want different people to deal with your business affairs to your personal affairs. If this is the case then it is possible to create two LPAs- one dealing with your personal affairs and a separate LPA to deal with your business affairs. If this is the case then it is important to include specific instructions in your LPAs detailing which attorneys have the power to deal with which assets. This is important so that, for example, your business Attorneys cannot make decisions with regard to your personal affairs or vice versa. Alternatively, you may only need to create one LPA that deals with both your business and personal affairs if you are happy for the same people to act in relation to both aspects. 

When choosing your Attorneys, you must carefully consider whether they would be suitable for the role and that they understand what their responsibilities would be including any other matters that should be considered such as additional insurances or any other requirements depending on the type of your business.

Upon your retirement, for example, or if the relationship between you and your Attorneys breaks down then it is always possible to revoke an LPA provided you have the necessary capacity to revoke it.

If any of the situations mentioned above occurred and you did not have an LPA in place, an application could be made to the Court of Protection for a Deputyship Order but this is much more expensive than an LPA and can take a number of months to finalise which is likely to be disruptive to your business. In addition, you would not be able to choose the person appointed as Deputy- the Court of Protection would choose and this may not be someone you would have chosen yourself.

When setting up a new business, there are many different matters that need to be considered and it is likely that creating an LPA for your business affairs was or is probably not at the top of your list of priorities. However, circumstances can arise whereby you may be unable to make decisions with regard to your business or continue to deal with business matters whether long term or short term and, in such cases, it is important that your business can continue to run effectively and smoothly by having a suitable person appointed as your Attorney.

To discuss Lasting Powers of Attorney, please contact one of our lawyers in the Wills, Powers of Attorney and Probate Department:-

Jamie Dobbs- jamie.dobbs@maplessolicitors.com

Jane Mawer- jane.mawer@maplessolicitors.com

Faye Blair- faye.blair@maplessolcitors.com

Or telephone the office 01775 722261 and ask to speak with one of the team.