Business continuity is one of the key elements in business planning. As a business owner the main objective is to ensure the efficient running of the business in the event of any disruption which could happen if you were unable to make decisions. This may be if:
- You were to have an accident
- You have a medical condition that incapacitated you
- You were abroad on holiday or business
What would you do if you couldn’t make the day to day decisions?
An alarming fact that very few business owners realise, is that once they are unable to manage their own day to day business affairs, there is no one else ( not even your closest family member) that is automatically given the power or legal authority to deal with these business affairs on your behalf. Access and operation of the financial affairs of the business including using the bank accounts is not permissible. Without a Business LPA in place it is possible that:
- Bank accounts would be frozen particularly those with overdraft facilities
- Uncompleted transactions would not be finalised
- Contracts become voidable
- Stock could not be purchased
- Employees salaries are not paid
- Creditors do not get paid
- Loans default
- Rent or mortgages go into arrears
Without a Business LPA in place an application would have to be made to the court of protection to appoint someone to run the business, a process that usually takes months and costs thousands of pounds. The business may be irreparably damaged due its financial and operational failings by the time this decision is made. The court makes the decision on who should be appointed to run the business, not the business owner. This may result in a individual being appointed who the business owner does not approve of or prefer.
A Business Lasting Power of Attorney
Having someone that has the legal authority to deal with these matters can be essential to the health and survival of the business without any delays. By putting a Business LPA in place you appoint an individual (Attorney) you trust to deal with your affairs whenever you need them to act on your behalf. It makes sense to appoint someone who is familiar with the business, this could be a business associate or partner or may even be a family member who understands the business.
You can choose how many Attorneys you would like to appoint and it is possible to appoint just one Attorney. However, if this Attorney dies or becomes mentally incapable or even bankrupt, then the power ends and you would need to make a new document again provided you are able to do so. It is always advisable to appoint a replacement Attorney in the event that the first and only Attorney is unable to act.
Alternatively, you can appoint two or more Attorneys and you may choose on how they act on your behalf:
- Jointly – this means they will always act together. This ensures that your Attorneys will have to agree on everything and act together at all times. If one of them is unable to act or dies, then the power ends because the other Attorney cannot act alone.
- Jointly & Severally – this means that your Attorneys can act together but can also act independently of each other if necessary. This type of appointment is more flexible because if one Attorneys is unable to act, the other has a right to act on their own.
- Jointly in some matters & jointly and severally in other matters. This means you can specify when your Attorneys should act jointly and when they should act jointly and severally. Again, the power would be limited as some matters could only be dealt with jointly, as mentioned above.
When can an Attorney act?
A Business LPA can be used as soon as it is registered with the Office of the Public Guardian, regardless of your mental capacity, provided there are no restrictions.
Whilst you are still mentally capable, you make decisions regarding your business affairs yourself. Your appointed Attorney will carry out your wishes if you can not carry them out yourself or if you instruct them to deal with some matters on your behalf, provided you have not restricted the power to be valid only if you lose mental capacity.
If you have lost the capacity to make the decisions yourself, your appointed Attorney will make and carry out the decisions on your behalf. As long as you are still able to make decisions on your own behalf, you can revoke a Business LPA at any time and you do not need to give a reason.
What type of business benefits from a Business LPA?
Sole Traders, Partnerships and Limited Companies all benefit from a Business LPA, however ownership structures differ from within these different business types and from business to business. With this is mind, our small business service offers a free initial consultation with you to ensure we clearly understand you, your business and your continuity plans. A Business LPA is also a tax allowable expense, so it would make sense to contact us and explore how we can help safeguard your business today.
BUSINESS OWNERS can contact us here.