Why a Business Lasting Power of Attorney can secure your venture’s future

Many of us are familiar with Lasting Power of Attorney, which enables someone to act for you if you ‘lose capacity’, but did you know you can apply the same principle to your business? Sarah Cornish, Coodes Solicitors talks about Business LPAs.

What is a Business LPA?

A Business LPA means someone – or more than one person – could step in as an attorney to take care of the business should you be unable to do so in the future. This could be because of an accident or a condition such as dementia.

A BLPA is especially important for a small company with a single director. It will ensure someone else could make decisions and continue the day to day running of the company.

Who should I appoint as my attorney?

Clearly, it would be important that whoever you choose is familiar with the business concerned and is someone you trust with your affairs. If you already have an attorney for your personal financial affairs, it would not necessarily be advisable to choose the same person for your Business LPA.

Where appointing more than one attorney, you would need to decide whether the attorneys have to act together in all decisions or whether they can potentially act independently of one another. I would recommend the latter option, which can provide greater flexibility, particularly if one of the attorneys is unable to act for whatever reason.

What if I am a sole trader?

If you run your business as an individual and the business does not have its own separate legal identity from yours, then you are a sole trader. It is important for provision to be put in place for the running of the business and protection against risk if you go on holiday, become seriously ill or lose mental capacity. A BPLA will enable the attorney to continue paying bills and ensure that there is no loss to the business.

What if my business is a partnership?

Before looking to make a BLPA, you should consult your partnership agreement as this may already have provision for the mental incapacity of the one of the partners.

If a BLPA is still required, the document should be carefully drafted so as to avoid any conflict with the Partnership Agreement. At Coodes, I work closely with our Corporate and Commercial team to ensure that the partnership documentation is compatible.

How do I know if I need a Business LPA?

In order to determine whether a BLPA is required, the first port of call is the company’s articles of association. This may provide for the termination of a director’s appointment on incapacity in order to protect the company’s interest. If this is the case, a decision may be made that a BLPA is not needed. If your company’s articles do not make these provisions, it might be better for the articles to be amended rather than for a BPLA to be put in place.

This is a sensitive area. If company documentation requires that a director must relinquish his or her directorship on the grounds of mental capacity, the company may find itself subject to a discrimination claim.

A good lawyer can talk through the options and ensure you find the best way possible of securing a future for your business, whatever happens.

For advice on any aspect on Business Lasting Power of Attorney please contact Sarah Cornish at Coodes Solicitors on 0800 328 3282 or sarah.cornish@coodes.co.uk