Business LPAs and why you need one.

What would happen to your business if you couldn’t be there to run it?

A Business LPA forms an essential part of any crisis planning for a company or organisation, in the same way that a business continuity plan ensures a business keeps operating in the event of, for example, a flood or cyber attack. Lucy Wilton, Solicitor at Penderlaw, explains the importance of Business LPAs and how they work.

Most people have heard of a Power of Attorney, or Lasting Power of Attorney as they are now known.  However, many business owners perhaps haven’t considered, or don’t want to consider, what would happen should they become unable to run their business. 

Without wanting to be a doom-monger, it is important to consider this scenario to avoid chaos and disruption, as well as further distress to your loved ones and employees.  Having a plan in place to cover a situation where you lose capacity can also sometimes be a regulatory requirement or needed for insurance purposes.

What would happen without a Business LPA in place?

Without a business LPA, you are putting your business is at risk. The unthinkable does unfortunately happen from time to time. If something were to happen to you, whether it be a car accident, a heart attack or diagnosis of a serious condition leaving you unable to run your business temporarily or permanently, your business may struggle if you haven’t had the foresight to arrange a Business LPA.

Frozen bank accounts, staff and suppliers not paid

Without you around, bank accounts may be frozen, creditors, suppliers and staff could go unpaid and plans, contracts and other important documents may not progress, potentially resulting unnecessarily in the collapse of your business.  

Invalidated insurance & reputational damage

Insurance can be invalidated, professional bodies may withdraw licenses to practice and there is also a danger of reputational damage if your clients, customers, or suppliers don’t feel reassured and confident that the business will continue and be stabilised in your absence.  

Paralysed business admin damaging continuity of operations

Apart from all that there is also the administrative headache with the nitty gritty of the everyday bits and pieces such as renewal of services which enable the business to operate such as IT, utilities, office supplies, business rates and tax which may be all in your name and hassle to change without the authority provided by a Business LPA. In short, without a business LPA in place your business could well be paralysed without your authority available to allow things to function.

Doesn’t my existing LPA cover things?

It is often the case that family and friends are appointed as attorneys for personal matters, i.e. your own personal finances and health and welfare. However, for business LPAs, a more sensible choice is more likely to be a business colleague or peer. Key people within your business, or someone who has some expertise combined with objectivity, would be more likely to ensure the survival of your business, and in doing so, protect income for your family. Not to put too fine a point on it, your nearest and dearest may not necessarily have the best skill set to manage your business, especially when it would be at a challenging and emotionally difficult time. Just relying on your twentysomething kids for example to “give it a go”, might well end in disaster.

Do small businesses really need a Business LPA?

Absolutely. Small family businesses where the business is the main source of income for the family need to be protected, should the unthinkable happen. If you are the effectively ‘the business’ then you should plan for a time where you may require assistance even more so!

Vulnerability of Sole Traders

Sole traders are also especially vulnerable without a Business LPA in place as they are not a separate legal entity to their business, and therefore at high risk without an LPA because their bank accounts may be frozen, they may be unable to appoint other directors, or enter into contracts.

Difficulties around removing a partner who no longer has mental capacity

If your business is run as a partnership, without a Business LPA in place it can be hard to remove a partner or director who lacks mental capacity as they cannot consent to being removed.  A Business LPA can enable this or otherwise the alternative is the Court of Protection which can be a lengthy and expensive process during which time the business is paralysed.

What type of thing does a Business LPA cover?

A Business LPA will appoint your chosen attorney(s) to act on your behalf to ensure continuity of your business should you be come unable to make such decisions.  You can choose to have different attorneys to cover different aspects of your business. If empowering people within your organisation then you should consider who would be available to cover off all of the duties and tasks that you currently undertake.

Who should I appoint as an Attorney for my Business LPA

Fundamentally, any attorney needs to be someone you trust completely, and who you are certain will always act in your best interests.  However, when choosing an attorney for your Business LPA, you will also need to appoint someone who has a thorough understanding of the field in which you work, as well as the business itself.  You may decide that the best option would be to have a family member as well as a colleague, so that should the worst happen, they can work together to run your business as you would wish.

Some governing documents for certain business structures restrict the use of LPAs for business purposes and so a solicitor will consider and report to you whether there are any conflicts here and advise on any alterations to your governing documents that may be required. If you intend to appoint a partner or another shareholder, thought should also be given to how that decision would weight voting rights over all etc. Given the potential impact on your business, professional advice is certainly sensible!

What do they cost?

The cost rather depends on the complexity of the business structure.  However, our LPAs are priced from £500 but we would be able to give you a precise cost once we have had an initial conversation with you.

How long would it take to set one up?

A Business LPA will need to be registered with the Office of the Public Guardian (OPG), they are currently taking around 8-10 weeks from receipt of the documents to register them. We also require the persons appointed to execute the documents. As these types of LPA differ from personal LPAs, precise wording will be required within the drafting.

How long is a Business LPA valid for?

A business LPA is valid until you or your attorney(s) die or become bankrupt.

Can I cancel a Business LPA?

Yes, as long as you have mental capacity, you can cancel a Business LPA at any time. Making a new LPA does not necessarily revoke an existing document.

Get in touch

If you would like to discuss setting up a Business LPA our friendly and experienced team would be pleased to hear from you.  You can email or call 01872 241408.