What would happen to your business if you were not able to direct it and to make decisions? How would your staff get paid? Who would deal with suppliers? Who would be able to authorise payments and deal with legal requirements such as insurance?
You may have had the foresight to purchase Key Person Insurance to cover the possibility of your death or incapacity but whilst this will help financially it will not assist with the practicalities of running your business should you become incapable of working or making decisions.
Often business owners believe that family members, friends or colleagues would be able to step in and run their business on their behalf should they not be able to do so for themselves. They may have even set up informal arrangements for the eventuality but these are not legally sufficient. For instance a bank account operated in a sole name would not be accessible even to the spouse.
In order to act on your behalf someone would need to apply to the Court of Protection for a Deputyship Order. This is an expensive process and can take many months. In the meantime deals cannot be finalised, stock might not be purchased and employees might not be paid.
A Lasting Power of Attorney (LPA) is a device where a person (the donor) appoints one or more people (the attorney(s)) to act on their behalf if they become incapable of running their affairs. The attorneys’ powers are decided and documented in the LPA in advance and, should the need arise, the LPA can be registered with the Office of the Public Guardian to activate them. This will then give your attorney(s) legal authority to deal with the practicalities of your business.
You need to consider your business and your role within it. Are you a sole trader, in partnership or a director of a company? If you are within a partnership or company you will need to consider the political situation to ensure that the person appointed as attorney does not disrupt the balance. Preferably they should share your business views.
Regardless of business structure, you will need to trust that the person you appoint as attorney is going to run the business as you would, in your best interests, and that they have the skills and knowledge to do so. You will need to consider if the person is familiar with the business or the market it operates within and is confident enough to make decisions.
Many business owners have separate LPAs for their business affairs and their personal affairs because they wish to appoint different attorneys for each.
If your business is a partnership you will need to check your partnership agreement to see if there are any restrictions on the appointment of attorneys. Now might be the time to discuss the issue with your partners and amend the partnership agreement if necessary.
If there is no agreement concerning the appointment of attorneys then a court order may be required to remove an incapacitated partner.
If you run your business as a company director you are unable to delegate your functions as a director unless the Articles of Association allow this. The articles may need to be amended, otherwise, if you own shares in the company, your attorneys could act as shareholders to appoint a new director to ensure business continuity.
With the weight of business decisions it is easy to put these matters aside but you need to protect your hard earned success. An LPA can give you, your family, your partners, your staff and your suppliers peace of mind should the worst happen.