Business Lasting Power of Attorney: How good business planning means preparing for the worst
Crisis planning is all part of running a good, sustainable business. You prepare for the worst case scenario in the hope you’ll never need it. But what happens if a business owner is incapacitated due to illness or accident? Here in our latest short blog, William Rowe explains the benefits of Business Lasting Power of Attorney.
Whether it’s IT backups, security against hacking, alternative suppliers in the event of disruption - it just makes sense to be prepared. However, far too few business owners think about what will happen to their business if they are incapacitated.
If you were unable to run your business the negative outcomes are substantial. Just one example is the risk of frozen bank accounts if the bank learns that a Director signatory is incapacitated. Your investors might be spooked and try to get their capital back, and in turn, your suppliers may not want to do business if they think they might not get paid.
Hopefully you’ll recover, but your business might not.
However, just as with cyber security and supply chains, there are back-up plans you can put in place – one being a Business Lasting Power of Attorney (LPA).
When most people think of LPA they’re thinking of the measures to take legal decisions and act on behalf of loved ones who have lost the capacity to do these things themselves. But it can work in the same way for a business owner who wants to know that things can continue as normal in their absence.
Whoever you choose as a Business Attorney, they simply must be up to the job of managing your business affairs.
It is wise to separate your business and personal affairs for the purposes of an LPA. If you are a professional, such as an accountant or a chartered surveyor, and your attorney is to step into your shoes, then that attorney may need to be of equivalent standing to comply with the requirements of your regulatory body.
If your business is incorporated and governed by articles of association, very careful consideration needs to be given to these, so as to ensure the powers granted under your Business LPA do not conflict with them (and vice versa).
Also, thought must be given to how your Business Attorney would be expected to exercise their powers. For this reason, the creation of a Business LPA should always involve the assistance of a lawyer.
While the use of the Business LPA may only be temporary, it might be the case that you have to retire from the business. Your Business Attorney may have to sell your interest on your behalf. Choosing the right person for the job, someone qualified, familiar with the business and who can be trusted to know what you’d want them to do, is absolutely essential.
It is not something anyone would ever want to be in a position to have to put into action, but being prepared for the worst means you can concentrate on making your business the very best.
An associate in our Private Client team, William Rowe is a specialist in inheritance tax planning, the creation and administration of trusts, estates, wills and lasting powers of attorney.
He can be contacted on 01952 641651 or by email, firstname.lastname@example.org