Business lasting powers of attorney - Risk management for your business

Have you ever considered what would happen to your business if you:

• Became critically ill;
• Ended up on life support due to a serious accident or illness; or
• Were diagnosed with any form of dementia?

These are only a few examples of both sad and unfortunate circumstances that could affect any one of us, as no one knows what their future holds.

If you run a business alone and lose capacity or are unable to make decisions for any other reason, without a Lasting power of attorney (LPA) in place there will be no one authorised to make any decisions. If you own a business with others, the business could still potentially be at risk.

You may be familiar with LPAs, whereby an individual (known as a Donor) appoints an attorney or attorneys to act for them in relation to their finances. The main concern for most people when making an LPA, is ensuring someone is appointed who can make decisions should they lose capacity.

Business owners can also make LPAs specifically for their business interests appointing particular individuals to act on their behalf solely in relation to their business in the event they are unavailable or are no longer able to make decisions due to a lack of mental capacity. 

Your business may already use ordinary powers of attorney to deal with certain situations, such as an owner being out of the country. However ordinary powers of attorney are limited in scope and if a business owner loses mental capacity the authority of that ordinary power of attorney will end. This situation can cause serious issues for your business which can be avoided by planning ahead and making an LPA for your business assets (a business LPA or 'BLPA'). 

The making of a BLPA should be part of any business's crisis management plan to help manage the business and to reduce any risks to it in unforeseen circumstances. It can also help with:

• Continuity of care and operations - Ensures your business keeps running when you are unable to run it
• Immediate decision-making authority - Avoids delays by allowing a trusted person to step in without needing a court-appointed attorney
• Protection against financial disruption - Enables ongoing management of bank accounts, payroll, and supplier payments
• Maintaining regulatory compliance - Ensures someone can handle inspections, reporting, and legal obligations
• Preserving staff confidence - Provides clarity and leadership during uncertain situations
• Having tailored control over your business - Lets you choose who acts for you and defines exactly what powers they have

 

Who should be your attorney under a BLPA?

You can appoint anyone to manage your business. When considering who to appoint, you should give consideration to the following questions:

• Do they have the necessary skills?
• Are they involved in the daily running of the business?
• Do they have a professional qualification?
• Are they family members or fellow business owners? If so, is there a risk of any undue influence or conflict of interest?
• If you appoint your spouse, is the attorneyship to continue following a divorce?

 

What about my personal LPA?

You may already have a registered LPA in place that deals with your financial and property affairs. If you also own a business and do not have a separate BLPA in place, your attorneys appointed in the personal LPA would also be able to act for you as attorneys with regard to your business. This arrangement may be suitable for you, but it is worth considering whether this would be appropriate for your business. 

Our team can assist with advice regarding your choice of attorney and with the drafting of tailored guidance to ensure that the appointment is suitable and designed for your business' needs.

In summary, BLPAs can offer you and your business essential peace of mind and can be thought of as an 'insurance policy' that, hopefully, will never be needed. We recommend our clients incorporate BLPAs as part of their crisis management plan to help reduce any risk to their business in unforeseen circumstances.

---

For specialist legal advice on BLPAs and how we can help your business, please contact Pallvi Gami or William Hollins in our Private Client team.