To cover the same circumstances, business owners can make LPAs specifically for their business interests.
Mr Blake is the owner of a recruitment agency which has two employees. Mr Blake is a sole trader and, whilst one of his employees, Mr Brown, is at a senior level, as the sole owner of the business, he is solely responsible for decisions regarding the running of the business. He is the only signatory on the business's bank account, the insurance policyholder and signatory for all of the firm's contracts.
Mr Blake does not currently have a personal or business LPA in place, instead relying on an ordinary power of attorney, that authorises Mr Brown to act on his behalf when required, in his absence.
Mr Blake is sadly involved in a serious car accident and ends up in hospital in a coma.
As Mr Blake is in a coma, he currently does not have capacity to make any decisions. Since he has not made either a personal or a business LPA, his business will face some significant issues.
Had Mr Blake made a personal LPA in relation to his finances, whoever was appointed would also be authorised to deal with his business (unless this had been excluded). Whilst this would have been helpful to Mr Blake in this situation, it may not be what he intended, as the person you appoint to deal with your personal finances (often a close family member) may not be the person you would like to run your business if you were unable to.
Although Mr Brown is appointed under an ordinary power of attorney, he is only authorised to act whilst Mr Blake has capacity to make decisions himself (so would for example, be suitable for holiday cover)but the authority of this kind of power of attorney ends with Mr Blake's loss of capacity.
Therefore, no one is authorised to make any business decisions, and as a result the business is likely to fail.
In this situation, the only option available is for someone (perhaps a family member or Mr Brown) to apply to the Court of Protection for a deputy to be appointed, who basically fulfils the same role as an attorney.
There are, however, two issues with this option:
It is worth noting that an attorney appointed by a business LPA is only authorised to deal with decisions concerning the running of the business and not its day to day work. This means that in this scenario, they would not be authorised to provide advice to candidates concerning relevant job applications, or to company clients regarding filling their vacancies.
The first purpose of appointing an attorney is to ensure the seamless continuation of the business during a temporary absence. An attorney would be able to ensure that managerial level decisions can still be taken. For example, s/he would be able to pay staff, and enter into contracts.
If however in this scenario Mr Blake was not expected to regain his mental capacity and return to work, the role for the attorney would be to ensure the smooth running of the business until it could be sold and to then to negotiate a fair price for the business on his behalf.
How Can We Help?
Whether sole trader, partner or director, business LPAs can offer you and your business essential peace of mind, providing an 'insurance policy' that, hopefully, will never be needed. We recommend our clients incorporate business LPAs as part of their crisis management plan to help reduce any risk to their business in unforeseen circumstances.
Our Private Client and Employment teams work together to provide tailored advice to you about your business. We can provide comprehensive advice regarding your business LPAs, including your choice of attorney and the drafting of tailored guidance to ensure that the appointment is suitable and designed for your business' needs.