Lasting Power of Attorney for Business Owners
Most business owners have not considered what would happen to the day to day running of
their business in the event of their own physical or mental incapacity.
What is a Lasting Power of Attorney (LPA)?
A Lasting Power of Attorney, also known as an LPA, is a legal document that allows you to appoint people that you trust to help make decisions with you (if you still have mental capacity) or on your behalf should you lose mental capacity temporarily or permanently in the future. Appointing someone to act under an LPA is often considered when planning for the future. It is different to a Will, as it covers what will happen during your lifetime, but is often put in place at the same time. Anyone over the age of 18 can make an LPA as long as they have the mental capacity to understand the document and the power that they are giving to their Attorneys. If someone does not have that capacity, then it will be too late to set up an LPA and an application to the Court of Protection to appoint someone as their Deputy will be required. This process can take many months to be completed.
What is a Business Lasting Power of Attorney (BLPA)?
Whilst traditionally used to deal with your personal affairs, Lasting Power of Attorney (LPA) can also be tailored to specifically cover your business, this is known as a Business Lasting Power of Attorney (BLPA). It can name the same or different individuals from your personal LPA to deal specifically with any decisions regarding your business. As a business owner, you may choose a trusted business associate to become your Attorney under a BLPA.
Who is involved in a Business Lasting Power of Attorney (BLPA)?
The Donor is the person setting up the BLPA to cover their affairs.
The Attorneys are the people appointed to manage the Donor’s affairs. Under a BLPA, the Attorneys should be trustworthy, competent and reliable. They should understand your business and be given clear guidance on how it should be run. They should have the skills and expertise to act on behalf of the Donor.
The Certificate Provider is someone who confirms that the Donor has the mental capacity to understand and enter into the BLPA.
What is the Process of setting up a Business lasting Power of Attorney (BLPA)?
- Choose who will be your Attorney(s). There is also the option to choose Replacement Attorneys.
- Consider any particular guidance or instructions you wish to add to the document to help the Attorney(s) deal with your affairs.
- Decide who will be your Certificate Provider to confirm that you have the capacity to enter into the BLPA. This could be a doctor, health professional, solicitor or someone who has known you well for a number of years.
- Once all parties have signed the BLPA, it will be sent for registration at the Office of the Public Guardian.
- The BLPA cannot be used until it is registered.
- Consider setting out a detailed plan about the running of the business for your Attorney in the event of your incapacity.
Why set up a Business Lasting Power of Attorney (BLPA)?
A Company or a Partnership could be left with a Director or a Partner who is not capable of fulfilling their duties and responsibilities due to a physical or mental incapacity. There may be insurance, regulatory or statutory breaches if the particular Director or Partner cannot fulfil that role. In event of a business owner becoming incapacitated, having a BLPA in place can:
- Promote business continuity
- Provide reassurance and protection to business associates and employees
- Give security of the business as a going concern for sale purposes
- Reduce insurance risk
- Protect against creditors bringing debt claims
- Prevent the loss of reputation and goodwill.
Having a BLPA in place ensures that there is someone legally appointed to stand in your place to make decisions and allow business continuity at what will already be a difficult time for all involved.
What would happen if a Business Lasting Power of Attorney (BLPA) wasn't in place?
- No-one would have the legal authority to represent the business owner to deal with these business interests and assets.
- If the business owner lost capacity, then someone will have to apply to the Court of Protection to be appointed as a ‘Deputy’ to look after the affairs of the business owner. This could take 6-12 months and is very costly.
- The value of the business could decrease, especially if it cannot continue to trade.
- There could be a loss of reputation/goodwill.
- Business bank accounts could be frozen.
- There could be debt claims which could lead to liquidation/bankruptcy.
- Possible loss of the family home if it has been given as security for the business.
- Contracts could be void or unenforceable.
- Unhappy/worried business associates, employees, clients with the uncertainty that the business could not continue as normal.
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What is probate?
Probate covers the legal and financial processes involved in dealing with the assets of a person who has died. This usually covers property, money and possessions. If property or land is involved you will almost certainly need to apply for probate.
How do I apply for probate?
There are a number of steps involved in applying for probate. It should be done by the next of kin or, if a will was in place, the executor of the will. In very simple terms probate involves gathering together assets, paying any bills, distributing whats left in accordance with the will.
Can I appoint someone to do it for me?
We can deal with the whole estate on your behalf. We will provide you with a dedicated lawyer who is an expert in the probate process. We will manage the whole process on your behalf, keeping you involved along the way.