Richard Ostle, Private Client Partner, writes about the importance of Lasting Powers of Attorney for Business Owners.
When business owners are reviewing crisis management and continuity planning for their organisation, one question that has inevitably been high on the agenda in recent times is the potential impact on the operation of that business if key stakeholders and personnel fall ill or are incapacitated for an extended period.
The challenges that can arise in that circumstance can be enormous, and immediate. Who can operate the business bank accounts? Can the business fulfil its contractual obligations? Can it enter into new contracts or enforce its rights under existing ones? Will the business effectively be deadlocked for many months?
Without the right legal arrangements in place, the viability of the business as a whole may be at risk.
One part of the solution is for the business owners or managers to consider making a bespoke Business Lasting Power of Attorney (BLPA).
Most people are familiar with the concept of putting in place Lasting Powers of Attorney (LPAs) for personal finance and health decisions – as detailed in our general briefing note – which sets out the key features of the LPA regime.
A BLPA offers similar legal protections, but is tailored to cover business needs rather than personal ones. The key difference is that the scope of a BLPA is focussed on the commercial operation of the business and its finances. The BLPA enables a business owner to nominate one or more attorneys specifically to make decisions concerning their business interests.
As with any LPA, the choice of who should be appointed as an attorney under a BLPA is key to its effectiveness. In many cases the attorney for business will need a different skill set to an attorney appointed under a personal LPA. Decisions that the attorney may be called upon to deal with could include:
- Paying wages, taxes, VAT
- Appointing managers/directors
- Entering into contracts
- Discharging debts
- Dealing with property
- Sale or winding up of the business
Whether the business is run as a sole trader, limited company, LLP or partnership, planning and implementing a BLPA is an important step. Although of course it is hoped that the BLPA will never need to be acted upon, if it is necessary it can be invaluable.
Our advice to business owners is not to spend all your effort building up your business, then overlook putting in place a fundamental protection that can save a huge amount of cost and trouble, if ill health should strike.