Business Lasting Powers of Attorney - Risk Management for Your Business
What would happen to your business if you became critically ill, ended up on life support due to a serious accident or illness, suffered a mental breakdown, or were diagnosed with 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. Mental health problems are a particular issue in our society today, with one in six of the UK working population having mental health concerns affecting their ability to work or make decisions.
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.
What Is a LPA?
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 Lasting Power of Attorney (BLPA).
The making of a BLPA should be part of any business' crisis management plan to help manage the business and to reduce any risks to it in unforeseen circumstances. It will also provide you with peace of mind.
What Are the Risks of Not Having a BLPA in Place?
Some potential repercussions of not having an attorney appointed under a BLPA include:
- business bank accounts being frozen
- contracts becoming void and the inability to enter into new ones
- potential regulatory or statutory breaches
- insurance issues
- potential discrimination claims on behalf of the incapacitated business owner
The last point is the biggest issue you may face if you do not have a BLPA in place. Without one, you will be unable to legally remove a fellow director or partner who has lost capacity, without potentially infringing discrimination legislation.
By making a BLPA, you are helping to avoid potential legal issues of which you may not be aware.
Do I Need a BLPA if I Already Have an 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.
What Are the Benefits of Having a BLPA?
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.