Creating a Financial and Business Lasting Power of Attorney
Individuals with business interests have most likely invested blood, sweat and tears into the running of their business to ensure their success. Key Person Insurance may well be at the forefront of your mind, but have you considered protecting your interest if for whatever reason you cannot make certain decisions? Lasting Powers of Attorney (LPAs) should be considered as another insurance policy vital to the ongoing success of your business.
It is generally perceived that having a lack of capacity would be a gradual process and more often than not, associated with old age. However what if one of the key people in your organisation is out of the country for a prolonged period, or suddenly becomes incapacitated due to a serious illness, a sporting injury or undergoing an operation that has complications associated with it? Does your business have a practical and workable strategy to deal with these scenarios?
What is an LPA?
An LPA is a legal document giving your attorney (a trusted individual appointed by you) the authority to manage your personal or financial affairs should you lose either temporarily or permanently the capacity to manage them yourself.
There is more than one type of LPA available. The property and financial affairs LPA gives your attorney authority to deal with your property and finances as you specify and can include your business affairs. There is also a personal welfare lasting power of attorney which allows your attorney to make health and welfare care decisions on your behalf only when you lack mental capacity to do so yourself.
Why do I need a Commercial or Business LPA?
Consider; who has the legal authority to make decisions regarding your business? Who is able to use and access the business bank accounts to keep payroll going and settle outstanding accounts? Who can negotiate new contracts?
There may well be a professional understanding among the directors that they would manage but if any of the key individuals lost capacity how would the fundamental aspects of the business continue to operate?
If you lose capacity and you do not have a LPA then a Deputy will need to be appointed by the Court of Protection to enable your personal and business affairs to be managed on a continuing basis and thereby avoid damage to your business and/or its reputation. This can take many months to organise and can also be a costly and expensive process.
Commercial and business LPAs help to ensure business continuity by giving trusted individuals either inside or outside the organisation the authority to manage affairs on your behalf.
You can have more than one LPA if it is your wish to keep your business affairs separate from your personal finances. You can restrict your LPA in a number of ways. You can allow your attorneys to do certain acts with the agreement of your other appointed attorneys or allow them to act independently with complete authority. It is also necessary to check your company articles as it may be that your choice of attorney needs approval from company officials.
It is vital that these documents are carefully drafted so that there is no ambiguity or conflict in terms of the authority given. Therefore you should instruct an experienced professional to prepare the document on your behalf to ensure that your LPA achieves your intended purpose.
If you would like to discuss this topic further, please call Becca Watkins for a free no-obligation chat on 01326 313441.