How a business lasting power of attorney can protect you & your business

As a business owner, you have a lot of things to consider when it comes to your role and the future of your business, but have you ever thought about what would happen if you are incapacitated, either mentally or physically? That is where a Lasting Power of Attorney (LPA) could be necessary in order to authorise someone else to make your decisions.

Business Lasting Power of Attorney

A Business Lasting Power of Attorney (BLPA) enables someone else to act within a business on your behalf if you are unable to. Lovedays Solicitors, specialists in Commercial Law explains that you will need to set this up in advance of anything happening, and you will need to specify who the attorney should be and what tasks they can undertake.

This might include entering into new contracts, managing business assets and dealing with employees, and can even detail the decisions you would want to be taken. These are all matters that relate to running a business, and every act must be in the best interests of the person who set up the BLPA (the Donor) and the business itself.  

If you are worried about the direction that your business might take in your absence, it is also possible to put together a separate memorandum which allows you to outline your views and wishes about the business as guidance for your attorney.            

If you are a sole trader, you are unlikely to have a separate legal entity so appointing an attorney could be the only way of keeping your business running. If you are a partner, then you will need to check the terms of your partnership agreement as there may already be a provision within it.

A director of a company you will need to check whether your article of association provides for the termination of a director’s appointment if they lose capacity. As the sole director of a small business, this situation is less likely and a BLPA would be an appropriate arrangement.

Choosing an attorney

When setting up a BLPA it is important to choose your attorney wisely. It goes without saying that this should be someone you trust, but it also needs to be a person who understands the business and how it works. It could be someone from within the business or a third party from a related field.

You should be sure that they are competent to do the job as well as reliable. They are separate from a personal affairs LPA and will take precedence in matters of business, however, in some circumstances, one person can be appointed to cover both personal and business affairs if there is not a conflict of interest.

It might seem unlikely that you will ever find yourself in this position, but it is often best to cover all eventualities. If something should happen to you, the business may cease to operate, leading to the business bank account to be frozen, contracts to be unfulfilled and staff to be unpaid.

An application would then need to be made to the Court of Protection for the appointment of a Deputy which can be a lengthy process and very expensive. Having appointed a BLPA in advance will help to keep things running smoothly and protect everyone involved in the business.

Choosing to nominate an BLPA is a big decision, and involves a lot of responsibilities, so it is advisable to discuss it with the person you chose first. This ensures that they do not get a shock should it ever happen and are happy to carry out the role.