What are Business LPAs?
Lasting Powers of Attorney (LPAs) are legal documents, which are drawn up to provide the people you choose (your attorneys) with the power to help manage your affairs and make decisions on your behalf, if you are no longer able to do this for yourself.
This can be invaluable if you ever lose the mental or physical capacity to be able to make certain decisions yourself. Without having an LPA in place, your family or loved ones will have no automatic right to manage all your affairs and they would need to apply to the Court of Protection for a deputyship order.
There are different types of LPAs, which allow your attorneys to make decisions about specific aspects of your life. The two most common types of LPAs for individuals are Property and Financial Affairs and Health and Welfare.
A Property and Financial LPA gives your appointed attorneys the power to manage things like your bank accounts, the payment of everyday bills and the buying or selling of your house.
A Health and Welfare LPA gives your attorneys the power to make decisions about your wellbeing, including, where you should live, the type of care you should receive and you can even give them the power to make decisions about the provision of life-sustaining treatment.
If you are a company director, or a partner or sole trader of a business, you should also consider making a Business LPA alongside your Property and Finance and Health and Welfare LPAs.
A Business LPA is a type of financial LPA, which specifically deals with the financial aspects relating to your business assets. Instead of naming attorneys (like you would in your Property and Financial LPA) ‘Business Guardians’ are appointed to step in on your behalf, if ever you were in a position where you could no longer work. Your Business Guardians would not necessarily have to physically take on the work themselves (as they would have the power to delegate the day-to-day running to other people) but they would have the power to oversee the running of the business and make any necessary decisions.
When making any type of LPA it is important to consider carefully who your attorneys/Business Guardians should be. It may be that you will choose different people for each LPA depending on their individual skill sets and how well they know you on a personal or a professional level.
When considering who to appoint as your Business Guardians, you should think carefully about how well your intended Business Guardian knows you and your business? Are they familiar with your business and how it runs currently? Would they be capable and willing to step into the role if required?
It is possible to appoint more than one Business Guardian, and this is often advisable. Appointing more than one Business Guardian ensures that there will be more than one viewpoint and often people will appoint a family member to act alongside a business partner for this purpose. A Business LPA is flexible, so if there are more than two Business Guardians appointed you can direct what decisions should be undertaken jointly or whether decisions can be made separately. You could also direct that some specific decisions should be made jointly but others can be made individually. If you need to change your Business Guardian’s at a later date, Business LPAs are revocable, which means they can be changed anytime whilst you retain capacity.
As with Property and Financial LPAs and Health and Welfare LPAs, Business LPAs need to be registered at the Office of the Public Guardian (OPG) before your Business Guardians will be able to use the LPA. It is always advisable to register your LPA with the OPG as soon as it has been drafted, to avoid any possible delays or problems later on and so that your Business Guardians will be able to step in straight away, if needed. This could be especially important if something happens to you unexpectedly. It is always possible to stipulate in your Business LPA that your Business Guardians can only act for you if you lose mental capacity, if you want to ensure that they don’t have any powers whilst you have capacity.
If you are involved in an accident or suffer from an illness, which prevents you from fulfilling your business role, and you do not have a Business LPA, the consequence can be disastrous. For example, business accounts could be frozen (leaving the business without access to funds) and contracts needing authorisation may made need to be stopped. Once you have lost capacity you will not be able to make an LPA and it will not be possible for someone to make an LPA on your behalf. Instead, a deputy will need to be appointed by the Court of Protection. This is a notoriously costly and timely exercise and it may be possible that your business will not be able to run during this time. You will also have no say in who is appointed as your deputy, it may be someone you would not have chosen for yourself.