Sector - Consultancy
Business at risk without lasting power of attorney
Sarah Nash is an Associate Director and the head of Ansons’ Wills, Probate and Trusts team. She is a full member of STEP, with more than 19 years’ experience advising on a wide range of private client matters including, Lasting Powers of Attorney and Deputyship. In this feature, Sarah speaks about how Power of Attorney is something that business owners should be thinking about
Most people understand the benefits of a lasting power of attorney (LPA), which allows an individual to nominate someone to take decisions on their behalf, if they become incapacitated in some way.
Less well known is the ability to put an LPA in place for a business, which makes a lot of sense in the current health crisis, when the sudden illness of a business owner could have serious ramifications for the business and its workforce, to say nothing of the owner’s livelihood too.
Lack of awareness is typically why business owners do not adopt a business LPA, without one the business will have to rely on the Court of Protection to appoint a deputy, which is often a lengthy process.
Being unable to access business bank accounts or make decisions for months could precipitate a quick demise for many businesses, adding to the owner’s problems.
It is often best to have an LPA in place, even if never used, so that it is there should something serious befall the business leader. The person trusted to step up and run the business can oversee the business bank accounts, and immediately deal with issues such as invoices, wages and tax matters, as well as assessing and signing contracts.
A sensible precaution
As a business owner, if you become unable to make decisions for any reason, it could severely impact on a vast number of people and ultimately the fate of your business.
The benefits of having an LPA in place for your business are therefore apparent; every person your business comes into contact with, from suppliers and creditors to clients and employees, could benefit from you having a trusted individual nominated to keep things running should you become incapacitated for any reason.
The people closest to you can also take peace of mind from knowing that there are measures in place to ensure the continuity of income from the business (from its continued operation) should something happen.
So why are LPAs for businesses so uncommon? Lack of awareness seems to be a key reason, with many business owners simply unaware this is an option.
Some people fear that even a temporary period of mental incapacity may lead to them permanently losing control of their business interests. The Mental Capacity Act 2005 deals with this concern, requiring the attorney you appoint to ‘so far as reasonably practicable, permit and encourage the person to participate, or to improve their ability to participate, as fully as possible in any act done for them and any decision affecting them.’
Others are content that in circumstances where capacity is lost, the Court of Protection will appoint a deputy. Whilst this is true, it can also present some serious issues.
Appointing a deputy can take several months, during which time, the decision-making processes and daily operations of a business, without leadership or direction from the top, can fall apart.
The appointment of a deputy is also an expensive process – the combination of the long timescale and costs can significantly impact a business.
On the other hand, putting a business LPA in place ensures that a person you know and trust will take the reins immediately, and can begin to deal with the usual running of the business without delay or unnecessary costs.
Make the arrangements now
A business LPA can be straightforward to organise. A Form LPF1 must be completed and signed by a witness, the chosen attorney and a ‘certificate provider’. The form is then registered with the Office of the Public Guardian (OPG).
At time of writing the fee for registering a business LPA is £82. If you arrange a personal LPA alongside a business LPA, then your personal LPA should stipulate that it does not cover your business affairs. Your business LPA must state that your nominated attorney has power only over your business affairs.
The choice of attorney to be appointed requires a lot of careful consideration. It is therefore important to consult an experienced team of legal advisors, who will offer support in making this decision, and the factors to consider.
Ultimately, the long-term security of your business and employees is at stake. Without an LPA, you risk jeopardising everything you have worked hard to build over the years.
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