In the last in our series on Lasting Powers of Attorney, we’re looking at business continuity and why you should include a business LPA in your plan.
To get up to date on all 3 LPAs we have posted blogs here:
LPAs cover health and welfare, and property and finance. These work together and protect your personal interests. So if you become physically or mentally incapacitated you can protect the best interests of your company.
Business Continuity Planning: why you should include a business LPA in your plans.
There could be important decisions to make in your business if you can’t, so putting the right structure in place means that your business will continue.
1. Your bank could freeze your accounts
If you are unable to make decisions through accident or loss of mental capacity your business still needs to function. Your fellow directors or partners have financial and operational responsibilities to meet. Take bank accounts for example. Your bank could freeze your business bank account if one or more of your partners or directors are incapacitated. If there is an overdraft in use this becomes more likely.
2. Your board of directors may not be able to hold AGMs or agree on dividend payments
As a company, you have to agree your dividend payments and hold AGMs. You may not be permitted to carry out these statutory obligations. Your shareholders will be left without their dividend payments and that could have a financial impact. Especially if, like most small companies, the directors are also the shareholders and draw dividends as part of their income to mitigate their tax liabilities. In the case of AGMs there could be consequences with Companies House.
3. Your partnership may not be able to function
Similarly to companies, partnerships have some statutory responsibilities to carry out but may also struggle to operate efficiently if a business continuity plan isn’t in place that includes provision for the loss of a key team member.
4. Regulated professions could be impacted
For solicitors and other regulated professions the professional bodies could intervene if you, as the business owner, lack the mental capacity to discharge your responsibilities.
Business contiunuity planning should contain a Business LPA
5. Contracts may become unenforceable
If you as the person who entered into a contract loses capacity that contract may be unenforceable for that reason. That can mean an immediate loss of business or services which could have a serious impact on your business.
6. Making payroll, tax and creditor payments might not be possible
Depending on how your business is organised, your business might not be able to make payments and meet financial responsibilities. That can have a serious impact. Your staff may not be paid for a period of time. And tax liabilities and payments to your creditors could lead to recovery action being taken as a worst case scenario. At best it means your business partners having to take time to resolve these issues. There is also the issue of investors who may wish to halt funding, or even have investments repaid.
Business Continuity planning saves time and money at a crucial time
To overcome the loss of a business partner a firm would be forced to go to the Court of Protection to appoint a deputy. This is a lengthy and expensive process that could take months to complete. That leaves the business at risk and exposed to uncertainty for a potentially long period of time.
Successful business continuity planning and Business LPA
Your business can avoid many of these problems if a Business Lasting Power of Attorney is put in place as part of the business continuity plan in your business. There’s a useful guide to creating a business continuity plan here.
Setting up your Business LPA
As part of your business continuity planning you are likely to identify most of the answers to the considerations for a business LPA. The following are some of the considerations that you might make:
- The structure of your business. legislation may govern what can and can’t be included
- What is it that you want your LPA to manage in the event that you can’t
- Has mental capacity actually been lost? Does the person that the LPA applies to understand the business fully?
- Who do you consider to be a suitable attorney
Carefully consider who you are going to appoint as your attorney.. They should be reliable, trustworthy, and have the necessary competences to run your business.
Is your business continuity robust enough to work with your chosen attorney?
- Do they have the necessary skill set? How do you know?
- Can your chosen person act as an attorney? People who are bankrupt for example are not.
- Could there be any conflicts of interest between your business attorney and health and welfare or property and finance attorney?
Your business attorney will be making decisions on your behalf that could affect the operations and profitability of your business. Remember this when you are making your decision on who to appoint. Your business continuity could fail if the person you appoint does not have the necessary competences.
How can Will Protect help?
The application process can be a minefield and the Office for the Public Guardian doesn’t provide guidance on how to complete the application forms.
Our team will take you through all of the steps so that you fully understand the process and what you need to do, submit the paperwork and liaise with you to deal with any queries that you may have.
We understand that these are difficult and sensitive matters. We will support you with a sympathetic, understanding but professional hand so that your wishes are recorded accurately and effectively and ultimately your best interests are always protected.