If you or a key member of the management were incapacitated would your business be like a ship without a captain, where even the smallest ripple became “the perfect storm”? Or would it carry on smoothly and calmly with a well drilled crew at the helm?
Lasting Powers of Attorney (LPA) are not only for personal use. If you are a company director, partner or sole trader, it is in your best interests to ensure you are protected, if for whatever reason it turns out you can’t end up taking certain decisions. Directors and Partners have a duty to act responsibly (s172 (1) & 174 Company Act 2006) and you may be in breach of this if you did not consider putting an LPA in place to cover a possible eventuality that would have a significant detriment on their colleagues, staff and business operation.
While we should all have powers of attorney in place to deal with a situation where we need someone to make decisions on our behalf, particular issues arise for those with businesses. We tend to assume that powers of attorney are for the elderly only. While the risks of losing capacity may increase with age, any of us can be involved in an accident or experience a medical emergency and the consequences of such an event on business owners can be very problematic. A LPA can also be used when you still have capacity, but are out of the country so this can be a very useful facility for business owners who travel abroad.
If an individual loses capacity and has not executed a valid LPA, (or Enduring Power of Attorney executed prior to 1st October 2007) family members or friends will only be able to deal with the affairs of the individual by applying to the Office of the Public Guardian for a deputy order. This is an expensive process that typically takes many months to obtain. Where a business is involved time delays can create significant issues for the owners in the meantime. Without a valid power of attorney, it is possible, for example, that uncompleted transactions could not be finalised, stock could not be purchased and employees might not be paid.
Whether you are a sole trader, partner in a partnership, company director or shareholder with voting rights in a company if you have not already got a power of attorney in place, it is important to consider making a ‘property and affairs’ lasting power of attorney to ensure that family members or other chosen individuals are able to make decisions and deal with day to day financial and administrative issues on your behalf in the event of you being unable to do so.
The first step in preparing a business LPA is a review of the company’s articles of association, or partnership or shareholder agreements. You will need to identify a suitable attorney. This should be someone you trust and who you know is capable of doing the job how you want it done. Once in place, the LPA will allow your attorney to make financial decisions on your behalf, including buying and selling property, organising property insurance and repairs, accessing bank statements, opening and closing bank accounts, investing assets, and dealing with tax affairs. It is possible to appoint more than one attorney, and specify attorneys to act jointly in some matters, but separately in others. Before your attorney accepts their role, ensure they fully understand the responsibilities and that they should take out their own personal liability insurance to ensure they are protected whilst acting on your behalf, and commit to follow health and safety regulations and policies too.
The Mental Health (Discrimination) Act 2013 now makes such a document more important than before because mentally incapable Directors, Partners and business owners are no longer removed if they lack mental capacity, either long term or temporarily. If there are no plans in place for someone to have the legal authority to act on behalf of an individual in their business capacity, including operating bank accounts and overseeing the running of the business, the banks may freeze the business accounts meaning staff and creditors do not get paid, loans default and rent or mortgages go into arrears. After 28 days, creditors can apply to Court.
Lasting Powers of Attorney for Business are also an allowable taxable expense so it would make sense to take advice on this issue to safeguard your business. Call us today on 0800 088 6004…you’ll be drawing on the experience and expertise of one of the most established teams in the area which offers the convenience of meeting you at a convenient location across Northamptonshire and Leicestershire.