Expert opinion: Five reasons to take out a lasting power of attorney for your business

We regularly hear about the benefits of lasting powers of attorney and their relevance in personal life, but all too often the importance of a lasting power of attorney for your business is overlooked.

However, just as an individual’s LPA – whether one for health and welfare, or for property and financial affairs – allows you to appoint attorneys to manage your affairs should you become incapacitated, a business lasting power of attorney offers the same protection to your business.

What is a business lasting power of attorney?

A business lasting power of attorney allows a business owner to appoint a person or people to make decisions in the best interests of the organisation should she or he become mentally incapacitated (or unavailable).

In the absence of a business LPA, a business is at risk. Bank accounts may be frozen, paying creditors or suppliers may be impossible, and what about paying staff? Can these day-to-day actions go ahead if the only signatory on all the relevant accounts and documentation is the business owner?

A business LPA is an essential part of any crisis planning for a company or organisation, in the same way that a continuity plan ensures a business keeps operating in the event of, for example, fire or flood.

Five reasons to draw up a business LPA

1. If the head of the company becomes mentally incapacitated, or seriously ill, or unable to perform his or her functions, without an LPA it is a difficult and long-winded process to remove that person from the helm. An application would need to be made to the Court of Protection to have a financial Deputy appointed, but this could take several months, during which time the business is vulnerable.
2. With nobody in charge, insurances may be invalidated, contracts entered into by the company may no longer stand, and bank accounts may be frozen, with implications for paying staff, suppliers and creditors. Indeed, a bank account may be frozen even if there are other signatories. Ultimately, this could result in the company’s demise.
3. With regulated organisations – such as law firms – the professional bodies may intervene, and potentially licences to trade could be withdrawn.
4. If you have a family history of, for example, dementia, then having a business LPA makes sense as you may be more at risk than most.
5. Other companies may no longer wish to trade with a business which has ‘lost’ its leader and is apparently rudderless.

Creating a business lasting power of attorney

Look first at what sort of business you run and who would be best placed to become your attorney(s) to act on your behalf.

You’ll want to choose people you trust but also those who understand how the business works. So you might, for example, want to appoint a member of your family and one of your business colleagues, who can work in tandem.

You’ll need a solicitor to draw up the business LPA. Personal LPAs – health and welfare, and property and financial affairs – can be drawn up at the same time.

The next step is for the document to be signed and witnessed by yourself and by your named attorneys, before it is registered with the Office of the Public Guardian.

The process is simple and straightforward, and provides you with peace of mind that your business will continue to run smoothly in the event that you are no longer able to take charge.

Alison Griffiths is wills and probate manager at Optimum Professional Services www.optps.co.uk