BUSINESS LASTING POWER OF ATTORNEY
Appointing a trusted representative to deal with your business affairs .
Dealing with money and paperwork can be difficult if you become unable to manage your personal affairs for any reason, and in certain cases it may be impossible. The same can be equally said for business affairs.
Before that should happen it could be easier to appoint a trusted representative known as an attorney, who can look after your business finances and transactions for you if the situation arise.
What is a business LPA?
A business LPA, also sometimes known as a commercial LPA, is a property and affairs LPA restricted to only give the attorneys authority over a certain business of the donor. It will allow the attorneys to make decisions regarding that business in the event that the donor loses capacity, or alternatively to make decisions whilst the donor still has capacity.
To make a business LPA, the donor would create multiple property and financial affairs LPAs. One would include an instruction that limits their attorneys’ authority to their personal affairs only. They would then have other LPAs that include instructions limiting those attorneys’ authority to only make decisions relating to that business.
We strongly recommend that a business LPA is created for each business owned by the donor. An LPA restricted to business affairs in general is likely to be considered too vague.
Why make business LPAs?
Since the Mental Health (Discrimination) Act 2013 was implemented, it is not possible for a director to be removed by the court if they have mental health concerns, including if they have lost mental capacity, as this would be seen as discrimination. By creating a business LPA in advance, directors are able to ensure that other people can continue to make decisions on their behalf for the business after they have lost mental capacity.
A person without capacity cannot enter into lawful contracts. Sole traders will no longer be able to sell goods or services. For partnerships or companies, this may destabilise the running of the business.
If a person who is a signatory to a business account loses capacity and does not have an LPA in place, the bank may freeze that account, which increases the risk that loans or overdrafts could be recalled. An application would need to be to made to the Court of Protection to remove that person as a signatory as otherwise it would not be possible to remove that person without their permission.
Along with the protection of the business from loss of capacity, there are other benefits to using a business LPA. It ensures that decisions regarding the business can still be made if the donor is on holiday, the donor is ill or off on long term sick or the donor wishes to semi-retire.
The creation of the business LPA should be treated as a business expense and therefore should be payable from the business rather than a personal expense of the donor.