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What is a Business Lasting Power of Attorney, and do I need one?
Harriet Pearce a paralegal in WSP Solicitors’ Private Client Department, explains the importance of a Business Lasting Power of Attorney (BLPA) and how is often overlooked.
A BLPA allows a business owner to appoint a person(s) (attorney) to make decisions in the best interest of the organisation, should the owner become mentally incapacitated or unavailable, such as managing finances, entering contracts and making decisions related to the operation of the business. This could include scenarios such as having an incapacitating accident or a medical condition, or if you are abroad for business or at a family event. This prevents potential disruption, loss of revenue, and legal issues that can arise when key decision-makers are suddenly absent.
Do you need to have a Power of Attorney for your business?
A Business Lasting Power of Attorney is recommended for all types of businesses, regardless of their size, structure, or industry.
Sole Trader –It’s likely your business will not have a separate legal entity from you. A BLPA would be necessary for the continuity of your business.
Partnerships – Check the terms of the partnership agreement. Partnership agreements may already include provisions for what should happen if a partner becomes incapacitated. If such a provision exists, it may already provide for the continuity of the business and a BLPA would not be necessary.
Directors of companies – Check the company’s articles of association. Very often the articles provide for the termination of a director appointment if the director loses capacity. If a provision in the articles isn’t included, it’s recommended to seek advice and consider such a provision. Speak to a solicitor in our Commercial Department for more information.
If you are a sole director of a small private company, the articles of association are not likely to terminate a director, or else there would be no one to continue running the company. A BLPA would be necessary.
Why should a business owner have a Lasting Power of Attorney?
If you don’t have a BLPA, there is nobody legally authorised to make important decisions regarding your business if you become incapacitated. This can lead to uncertainty and confusion for your employees, customers, and business partners. Insurances may become invalidated, contracts may no longer stand, and even bank accounts held in joint names of business partners/directors may be frozen. It is essential to have a BLPA in place to ensure that your business can continue to operate smoothly and that important decisions are made in line with your wishes.
If you are unable to make business decisions and have no BLPA, it may be necessary to make an application to the Court of Protection for the appointment of a deputy to act on your behalf. This is costly and can take several months, even years to achieve, in which time the business is left vulnerable and it is likely there will not be a business by the time a deputy is appointed.
Do I need a separate business and personal LPA?
Although there are no practical differences between a business and personal LPA, it is recommended that these are separate. The responsibilities and decision-making processes for these areas vary significantly. Having one LPA splitting powers for business and personal use could create confusion regarding the scope of the attorneys’ powers, and the Office of the Public Guardian would likely reject the LPA.
Each Lasting Power of Attorney should contain specific instructions limiting the scope of the attorney’s powers (i.e. your personal LPA should specify that your attorney will have general powers relating to your personal affairs except for the relevant business assets which you have executed a separate BLPA for). It is important that a BLPA is distinguished and specific consideration is given to the structure of the business, whether it can continue, and any skills/qualifications an attorney may need. This ensures that your attorneys are clear about their powers and do not encroach on each other’s responsibilities and decisions.
How can WSP Solicitors help?
WSP can assist with creating a BLPA and can advise on who should be chosen as your attorneys, what powers they should be granted, and help negotiate any potential conflicts of interest. We can ensure that the document satisfies all legal requirements and is properly executed. Providing peace of mind for business owners, ensuring that your company is protected in the event of unforeseen circumstances.
For expert support with your personal and commercial affairs, please contact our local offices in Gloucester or Stroud today by using the contact form found here or on this page. Alternatively, you can call us on 01453 847200.