Mogers Drewett: How can Lasting Powers of Attorney protect my business?
As a result of COVID-19 outbreak, 2020 has been extremely difficult for many businesses, and have left many considering whether they have adequate protection in place to protect their business in the future.
It is, of course, important to put a Will in place to ensure your business
can function should the worst happen. However, have you considered what will
happen with your business during your lifetime if you are unable to look after
What is a Lasting Power of
A Lasting Power of Attorney (LPA) is
a document which allows you to appoint someone (an Attorney) to make decisions
on your behalf. There are two different
types of LPAs: for Property & Financial Affairs and for Health &
Welfare. The LPA for Property & Financial Affairs can deal with the
financial aspects of your business.
do I need an LPA as a business owner?
As a business owner, if you lose
capacity (due to an illness or an accident), the bank will freeze your business
accounts, and contracts entered into could become invalid. This can cause a
number of serious difficulties for the business, and may result in contractors
not being paid and employees not receiving their wages for a long period of
By putting a business LPA in place, you
can ensure that your business can continue operating by appointing an Attorney
(or Attorneys) who can act on your behalf.
You can grant your Attorney specific powers in relation to the business,
and it is vital to choose a person who you trust and who understands how the
about keeping my personal affairs separate?
You can make two separate LPAs for
Property & Financial Affairs – one dealing with your personal affairs
(personal bank accounts, property, pensions, etc), and one for the purposes of
your business only.
It is advisable to consider if
different Attorneys under the two separate documents should be appointed to
avoid a potential conflict of interest. Most importantly, there may be someone
other than a family member who understands your business and who will be better
placed as your Attorney under the business LPA.
am a sole trader / I am in a partnership / I have a limited company
There are various matters to consider
depending on how you own your business:
a sole trader you dictate how to manage your own businesses during your
lifetime. It is, therefore, important to
make an LPA to ensure that someone is able to take over your business if you become
may be no need for you to have a separate business LPA, provided you are happy
for your chosen Attorney to deal with your personal financial affairs and the
running of your business. If you are not, then you should consider making a
separate LPA for the business.
you are in a partnership, a partnership agreement should deal with incapacity
and its consequences. If the agreement does not provide for the loss of a partner’s
capacity (e.g., it may stipulate the partner who is incapacitated must retire),
then The Partnership Act 1890 will govern the partnership. Under this Act, the
partnership can be dissolved by applying to Court, which can be costly and time
is useful to have an LPA in place dealing with your interest in the partnership
(especially if the partnership agreement does not deal with incapacity). You
should carefully consider who to appoint as an Attorney, as if the appointed Attorney
and your business partner are the same person, there is a risk that the terms
of the partnership could be altered in the continuing partner’s favour.
company documents (Articles of Association and the shareholders’ agreement)
should deal with what happens on incapacity.
a shareholder may appoint an Attorney to exercise their voting rights on their
behalf, so that the business can continue running as normal.
What will happen if I don’t have
If you do not have an LPA and you lose the ability to make your own
decisions, an application would have to be made
to the Court for a Deputy to be appointed. Deputyship applications are very time
consuming, expensive, and complicated. As a result, until the Deputy is
appointed (which can take six months or longer), there is risk that no one
would be able to make decisions regarding your business affairs.
It is important to seek expect legal advice when putting a business LPA in place, to ensure the business structure is considered properly, so that your business can continue to operate smoothly. If you want to ensure your business is secure whatever happens in the future, please get in touch with Kat King on 01749 341805 or email email@example.com; mogersdrewett.com