In this article, we walk you through the benefits of setting up a Business LPA – which can be an invaluable document to safeguard the future of your business.
We will cover:
- How a Lasting Power of Attorney protects your business
- Why you should plan ahead in case of mental or physical incapacity
Business Power of Attorney UK – Benefits
If you’re a company director, there’s a possibility you may become incapable of making crucial decisions for your business.
This is where a Business Lasting Power of Attorney (LPA) becomes invaluable.
A Business LPA allows a trusted person to make decisions on your behalf, ensuring your business runs smoothly even in the event that you become physically or mentally unable to do so yourself.
Let’s explore why having a Business LPA is essential for every company director.
1. Overcoming Physical Incapacity:
Imagine you’re in another country and you suddenly become unable to travel back to the UK because of unexpected situations like travel restrictions or health problems.
In those situations, having a Business LPA allows you to rest assured that someone you trust can make important business decisions for you.
They can take care of tasks such as…
- paying suppliers
- signing contracts
- managing payroll
- accessing the business bank account
If you choose to plan ahead with a Business LPA, you safeguard your business’s continuity, even in your absence.
2. Addressing Mental Incapacity:
An accident or a medical condition that affects your ability to make decisions can greatly impact your role as a director.
During times when you’re mentally unable to make decisions, it’s crucial to have someone to make business choices for you.
However, without a Business LPA, your company could be left in a vulnerable position without a clear direction or authorised person to represent it.
This could lead to reputational damage or financial losses.
3. Differentiating Personal and Business Interests:
Although you could use a general LPA for both financial decisions and personal matters, it may not be appropriate for managing complex business affairs.
Think about whether your spouse or children, who may handle your personal finances, have the expertise needed to handle the complexities of your business.
Make sure that those you choose for your Business LPA understand the details of your business and have the right qualifications.
Failing to do so could jeopardise the company’s operations and future growth.
4. Reviewing Business Governance Documentation:
If you’re a sole trader, it’s relatively simple to assign a Business LPA.
However, directors of partnerships, limited liability partnerships (LLPs), or companies with multiple directors/shareholders need to consider additional factors.
It’s essential to carefully review your business governance documents as part of your routine business assessment.
This makes sure that you have suitable plans in place that comply with the law and do not violate equality and discrimination regulations.
If you get professional advice, you can make sure that your Business LPA matches your business structure and governance framework.
5. Family Businesses and Crisis Planning:
In family businesses, the incapacity of a close family member makes things more difficult for the future of the business.
Managing family dynamics alongside critical business decisions can be overwhelming.
An experienced team such as Noor Law can assist you with Business LPAs, business continuity, and crisis planning.
Noor Law Solicitors offers bespoke advice that will help you manage the intricacies of family dynamics while protecting your business.
Ensuring Business Continuity: Lasting Power of Attorney for Company Directors
If you’re a company director, it’s crucial to review your company’s articles of association.
These documents often explain the process for ending a director’s role if they become unable to work, which helps to protect the company’s interests.
But, while these documents might deal with cases where a director can’t work forever, they might not cover situations where a director can’t work for a short time or is absent.
In these cases, ending the director’s role might be too much, not needed, and could even harm the business.
For small private companies with just one director, the company’s rules often don’t include terms for ending the director’s role, because there’s no one else to take over the director’s duties.
In these situations, it’s especially important to set up a Business Power of Attorney.
A Business Power of Attorney gives a strong legal structure for passing on the power to make decisions and keeping the business running smoothly.
It lets your chosen representative step in when you can’t work and make important business decisions for you.
This makes sure key jobs, like running the business, handling money matters, and planning for the future, are done well, which helps protect the company’s interests.
By tackling any gaps in your company’s rules and setting up a Business Power of Attorney ahead of time, you’re taking steps to protect your business from any issues that might come up if you can’t work.
Navigating Personal and Business Affairs: Considerations and Solutions
When making a Power of Attorney document that covers both personal and business matters, there are some things you need to think about.
While it might be possible to have one document that appoints someone to make decisions for both personal and business matters, it’s crucial to think about whether it’s suitable for the same person to handle both areas.
There might be situations where conflicts of interest can come up, so it’s a good idea to choose different people as attorneys for personal matters and business matters.
Making a Power of Attorney document that assigns different people to handle personal and business assets can reduce conflicts that may arise.
However, it’s important to understand that this approach can lead to confusion about what exactly each attorney is responsible for.
In such cases, the Office of the Public Guardian is likely to reject the LPA due to the potential ambiguity.
What you can do
Thankfully, there is a viable solution.
It’s possible to create multiple LPAs, with one focused on personal affairs and another dedicated to business affairs.
This choice is especially attractive for people who want to keep both things separate.
If you choose to go down this path and create two Power of Attorney documents, each one should include detailed instructions to clearly explain what each attorney can and cannot do.
For example, the personal Power of Attorney should state that the attorney has control over personal matters but does not cover any business assets handled by a separate business Power of Attorney.
Likewise, the business Power of Attorney should clearly state its area of authority and exclude personal matters from its coverage.
By giving clear instructions in each Power of Attorney document, you make sure that the appointed attorneys know what they’re responsible for, don’t interfere with each other’s decision-making areas, and act according to your wishes.
By creating distinct LPAs with clear instructions, you can protect your business and navigate personal and business matters with confidence.
If you need help setting up an LPA, contact Noor Law Solicitors by sending them an email at email@example.com and they’ll guide you through the process.
Don’t let the future of your business go according to someone else’s wishes – set up a business LPA!
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Kind regards Ilyas