Why Make A Business Lasting Power Of Attorney
We know how important it is to make sure that in the event of some form of cognitive impairment, be it as a result of a stroke, a symptom of vascular dementia or the after effect of a nasty road traffic accident which has left us unable to make important decisions, a lasting power of attorney will help our nearest and dearest to manage our affairs for us.
If you are in business as a sole trader, a general partnership, a limited liability partnership or a registered company it is just as important to consider making a Business Lasting Power of Attorney.
This is a Lasting Power of Attorney but related solely to your business and your business interests.
It would allow you, if the worst were to happen, to be retired from the company, partnership or business and, your attorney could sell your interest, before things become difficult.
Have you ever considered what would happen to your business in the event you could no longer make decisions for yourself?
Have you considered that your mental incapacity or that of one of your fellow directors or partners could mean that access to bank accounts may not be possible, salaries may remain unpaid, contracts may be lost and suppliers may not be paid?
An understanding with business colleagues is not enough. Fundamental business operations may not be possible if you or one of your partners or business colleagues has lost mental capacity.
This could have a catastrophic affect on your business and importantly its value, which if you need to sell or sell your share could be detrimental to your family.
You may in the past have had a General Power of Attorney drawn up allowing one of your business partners to make decisions, on a temporary basis, while you were overseas or unable to oversee the business. This is all good business practice.
A general power of attorney however is temporary. It will not enable anyone to manage your business in the event that you were to lose mental capacity.
Until 2013 if a director or a partner became mentally incapable then the other directors or partners could seek a Court Order to have him removed.
The law has changed and will in all likelihood continue to do so. Removing stigma from mental health issues is high on the political agenda.
The Mental Health Discrimination Act 2013 has meant that a person can no longer be removed from office by virtue of their mental incapacity. They must be supported in their role rather than removed from it. It does not matter what the company Articles of Association may say. It is no longer allowed. Furthermore to even have it in your company articles can be seen as discrimination.
Unlike the General Power of Attorney the Lasting Power of Attorney is permanent. As long as you have capacity when you make it and as long as it is registered, then it can be used at anytime, whether that be next month or in 15 years time.
If you were to become mentally incapable and there was no Lasting Power of Attorney in place, then in order to keep your business running, a Deputyship application would have to be made to the Court of Protection. This is expensive and can take months.
During this time your business may struggle and may even not survive. Bank accounts may be frozen and your family and colleagues will be powerless to do anything about it.
By having already in place a BLPA, immediate action can be taken to keep the business running. Furthermore, your share could be sold while the business is still successful which is much better for your and your family's future.
These days, having BLPAs in place is paramount to the smooth running of a business. It should be seen as an important extension of managing your business interests.
This literature is intended purely as an overview of this topic and does not constitute legal advice.