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Do You Need an Attorney?

on Tuesday, 24 March 2020.

Lasting Powers of Attorney (LPAs) enable a person to authorise someone else to make decisions on his or her behalf, in the event of physical or mental incapacity.

There are two types of LPAs: A Health and Welfare LPA covers decisions relating to medical treatment and care. A Property and Financial Affairs LPA covers property dealings, pensions, operating bank accounts and so on.

Usually LPAs are looked at under the 'personal affairs' umbrella, but there is a place for an LPA to deal with financial matters in business too - a 'Business LPA' (BLPA).

Using a BLPA

A BLPA can be useful for partners in a business, members of an LLP, sole traders and directors. It ensures that if a key decision maker is unable to act, someone else can do so.

In using a BLPA, the attorney must act in the best interests of the person making the BLPA (the Donor)and the business. The Donor can specify in the BLPA the decisions he or she would want the attorney to be able to make. For example entering into business contracts, dealing with staff, managing business assets and so on. These are all matters relating to running the business, as opposed to working in the business.

It can also be helpful for the Donor to make a separate memorandum of wishes to set out his or her wishes and views about the business, to assist the attorney.

Who Should I Choose?

The person chosen needs to be someone who understands the Donor's business and how it operates. This could be someone already working in the business itself, assuming there are no conflicts of interest. Alternatively, this could be a third party from outside, possibly in a related field.

The Mental Capacity Act Code of Practice advises that an attorney should be trustworthy, competent and reliable, with the skills and ability to carry out the necessary tasks.

I Already Have an LPA – Why Do I Need a BLPA?

An attorney appointed under a personal Property and Financial Affairs LPA can take business decisions, but does that person have the necessary skills to do so?

A BLPA enables the Donor to appoint someone specifically for the purpose of taking business decisions, and that appointment takes precedence over the personal LPA for matters relating to the business. The attorney appointed under the personal LPA can then concentrate on the personal affairs of the Donor, without the additional complications of running a business.

What if I Don’t Have an Attorney?

At worst, if the Donor loses capacity to run the business, it could cease to operate. The business bank account might be frozen, contracts not completed, staff unpaid, and claims made against the company for its failures. In this situation, an application would have to be made to the Court of Protection for the appointment of a Deputy, a process which can take many months and is much more expensive and restrictive.

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If you want to learn more about Business LPAs, please contact Megan Seabourne in our Estates, Tax, Planning and Trusts team on 01923 919 360, or complete the form below.

 

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