Commercial Lasting Power of Attorney: an essential element of your business continuity plan
Are you a sole trader or a partner in a private firm? Do you have a Lasting Power of Attorney?
When you start a business probably the last thing on your mind is what would happen if you became unable to run your business. Although many business owners take out a Key Person Insurance Policy, they do not put in place another kind of insurance policy; a Lasting Power of Attorney (LPA).
Business owners are busy people. Running a business can take up all your time. But what if you found yourself incapacitated by illness or injury? What if you were out of the country and could not get home? Who would take over the day to day running of your business?
‘No automatic right’
You may think the options are obvious but there is no automatic right to deal with another person’s affairs. Unless you have appointed an attorney, the disruption to your business could be catastrophic. And it doesn’t take long either . . .
No one to sign on your behalf. No access to your bank accounts. Staff and suppliers not paid. Potential contracts lost. The effect of this will spiral. Your employees may face hardship from their lack of wages. Your suppliers may refuse to supply you and may in turn face financial problems.
Business continuity planning
When you are a business owner, no matter how small your business, you are an important part of the UK economy. You matter. You can avoid many of these problems by implementing a business continuity plan. One which includes a commercial Lasting Power of Attorney.
By putting an LPA in place, you can decide who you would like to deal with your business affairs should you become incapacitated. An LPA can cover both your personal and business affairs or you can restrict it to business affairs only.
Appointing an attorney
If the LPA relates to your business affairs only, you should appoint someone who you trust but who is familiar with the business. For example, if you are in a business partnership, it would make sense for the partners to appoint each other as attorneys.
It is possible to appoint more than one attorney to act in conjunction with each other. For example you may choose a trusted business associate, one who knows the business to act on your behalf alongside a family member. You may prefer to appoint your attorneys to act jointly in some matters but separately in others. For example, the trusted business associate could be appointed to negotiate contracts independently of the second attorney, but not able to access bank accounts without the approval of the second attorney.
Financial decisions your attorney can make
In most circumstances your attorney(s) can do the following on your behalf:
- Buy and sell property.
- Organise property insurance and repairs.
- Access your bank statements.
- Open and close bank accounts.
- Invest your assets.
- Deal with your tax affairs.
If this all sounds a bit daunting you can be rest assured that under the Mental Capacity Act 2005 your attorney(s) must act in your best interest and must follow a Code of Practice. This includes taking into consideration any views and beliefs you have expressed in the past.
If you sell your business or retire, you can revoke your LPA at any time.
It is natural to hope you will never need a lasting power of attorney but why take the chance? It is a small price to pay for the continuing success of the business you have worked so hard to build.