A Lasting Power of Attorney (LPA) is a legal document through which you authorise a chosen person or people (an attorney or attorneys) to make certain decisions, and act on your behalf.
The importance of a Lasting Power of Attorney (LPA) for an individual’s property and financial affairs or health and welfare matters is now commonly recognised (please see other articles on our website that provides an overview of the importance of having LPAs in place, and how LPAs work in practice). However, there is less surrounding the topic of a Lasting Power of Attorney for business owners.
Whether a sole trader (where we would suggest that at business LPA is vital), Partner, member or shareholder, a business LPA can assist with all aspects of business management and can prevent issues if the individual lacks capacity whether temporarily or longer term.
For a sole-trader, for example, if the sole-trader lost capacity, how would the business continue? Who could make payments (e.g. suppliers, staff, finance repayments etc)?
The LPA for your business allows you to appoint a person (or people), who will not only have the skills and knowledge to run the business, but also a detailed knowledge and understanding of you as an individual. Thus ensuring that your best interests are met whilst allowing the business to continue running effectively.
There are some other factors that may impact the person or people you wish to appoint such as the rules and regulations of any regulatory bodies. A partnership agreement or the articles of the company may also dictate certain criteria. With this in mind, if dealing with a limited company or partnership (i.e. not a sole-trader) corporate legal advice relating to the governance documentation of the business should be taken prior to putting such LPAs in place, as well as due consideration given to all aspects to ensure that the LPA for your business is effective and the attorneys will actually be able to act if required.
Further consideration also needs to be given to ensure that there are no other issues such as future conflicts of interest, insider trading or a greater shareholding (if the attorney is also a shareholder and with their own shareholding and the holding under the LPA they would have greater voting rights).
Within the LPA there is the ability to add detail within the instructions box which should be used to express as much detail as possible to again ensure the smooth running of the business in the future. Within this box you can also detail a specific business if there are multiple businesses in question.
Given that partnerships (providing they have an adequately worded written partnership agreement) and limited companies have, by the nature, protection for the business to continue, a business LPA may not be required, however, for sole-traders, this really should be considered.
These considerations should also be one point to consider when considering the structure of a business (along with tax, commercial risk, succession etc – which we can advise on), at the outset, and throughout the business life cycle.
If you would like further information on Lasting Powers of Attorney, then please get in touch on the numbers above, additionally you may find our Questions and Answers column here useful.