We are all familiar with lasting Powers of Attorney, which allows individuals to appoint an attorney to manage their personal affairs if they cannot do so themselves. A business lasting power of attorney operates on the same basis. It is a document that appoints an attorney to deal with your business affairs and make decisions if you are incapacitated and can no longer manage the business yourself. That may include decisions about your business finances, operations and legal matters.
Why is it essential to have a Business Lasting Power of Attorney?
A business lasting power of attorney (LPA) is essential because it ensures business continuity and smooth continued operation should the owner be temporarily or permanently unable to manage the business. It allows decisions to be made, wages processed and paid, and contracts signed or enforced even though the business owner is incapacitated.
Who can benefit from a Business Lasting Power of Attorney?
Sole traders and single-director limited companies benefit most from a business lasting Power of Attorney. A partner in a partnership or a director in a limited company (with more than one director) may benefit. However, the terms of the partnership agreement or the articles of association may contain provisions for dealing with the incapacity of a partner or a director, rendering a business lasting power of attorney unnecessary.
How does a Business Lasting Power of Attorney differ from a Personal Lasting Power of Attorney?
A business lasting power of attorney focuses on the donor’s business. The donor is the person who grants the business Power of Attorney. Whilst a personal lasting power of attorney will deal with the donor’s personal affairs, the business lasting power of attorney focuses on the donor’s business needs. These include business continuity, finance management, contract negotiation, completion and enforcement and general business operations. The business lasting power of attorney can be tailored to meet the specific needs of the donor’s business.
Compliance with the Mental Incapacity Act 2005
A business lasting power of attorney must comply with the terms of the Mental Capacity Act 2005, which sets out the specifics regarding the donor’s capacity. Section 9 of the Act and subsequent sections deal with the requirements for the creation of lasting powers of attorney, the appointment of attorneys (“donees”), restrictions, scope, and revocation.
Communicate the existence of the Business Power of Attorney to Stakeholders
It is essential to inform others involved in the business’s management about the existence of the business lasting power of attorney. It may also be advantageous to inform the business’s bank and professional advisers. As a result of the grant of the business lasting power of attorney, management will be confident of the business’s continuity.
Business Lasting Powers of Attorney – take legal advice
If you are considering drawing up a business lasting power of attorney, it is critical that you seek legal advice. This will ensure compliance with the most up-to-date legislation and that the power of attorney contains provisions tailored to your business and operational needs.
To discuss this, or any other related matter with Sandeep directly, please call 01483 887766, email info@hartbrown.co.uk or start a live chat today.
*This is not legal advice; it is intended to provide information of general interest about current legal issues.
