Most people understand the benefits of a lasting power of attorney, which allows an individual to nominate someone to take decisions on their behalf, if they become incapacitated in some way.
Less well known is the ability to put an LPA in place for a business, which makes a lot of sense in the current health crisis, when the sudden illness of a business owner could have serious ramifications for the business and its workforce, to say nothing of the owner’s livelihood too.
Lack of awareness is typically why business owners do not adopt a business LPA. Without one, the business will have to rely on the Court of Protection to appoint a deputy, which is often a lengthy process.
Being unable to access business bank accounts or make decisions for months could precipitate a quick demise for many businesses, adding to the owner’s problems.
It is often best to have an LPA in place, even if never used, so that it is there should something serious befall the business leader.
The person trusted to step up and run the business can oversee the business bank accounts, and immediately deal with issues such as invoices, wages and tax matters, as well as assessing and signing contracts.
A sensible precaution
As a business owner, if you become unable to make decisions for any reason, it could severely impact on a vast number of people and ultimately the fate of your business.
The benefits of having an LPA in place for your business are therefore apparent; every person your business comes into contact with, from suppliers and creditors to clients and employees, could benefit from you having a trusted individual nominated to keep things running should you become incapacitated for any reason.
The people closest to you can also take peace of mind from knowing that there are measures in place to ensure the continuity of income from the business (from its continued operation) should something happen.
So why are LPAs for businesses so uncommon? Lack of awareness seems to be a key reason, with many business owners simply unaware this is an option.
Some people fear that even a temporary period of mental incapacity may lead to them permanently losing control of their business interests.
The Mental Capacity Act 2005 deals with this concern, requiring the attorney you appoint to ‘so far as reasonably practicable, permit and encourage the person to participate, or to improve their ability to participate, as fully as possible in any act done for them and any decision affecting them.’
Others are content that in circumstances where capacity is lost, the Court of Protection will appoint a deputy. While this is true, it can also present some serious issues.
Appointing a deputy can take several months, during which time, the decision-making processes and daily operations of a business, without leadership or direction from the top, can fall apart.