It’s not unusual for business owners to take out key person insurance and to have crisis management plans in place, but what happens if you as a sole trader, partner or company director became incapable of running your business or making important day-to-day decisions?
If you, or a key colleague, were stranded abroad due to delays or extreme weather conditions or, worse still, lost physical or mental capacity as a result of illness or injury, what would happen to your business?
Worryingly, many financial institutions respond to a business owner’s lack of capacity by calling-in loans and freezing bank accounts. However, by having a Lasting Power of Attorney (LPA) in place for your business interests, you can ensure that your company runs smoothly even when you are unavailable.
A professionally drafted commercial LPA is as important to your business as insurance. There are a number of considerations though:
The importance of choosing the right attorney
When choosing a suitable attorney to act on your behalf you need specifically tailored advice to ensure that power groups are not inadvertently formed within a partnership. Under the Mental Capacity Act Code, your attorney must also be ‘trustworthy, competent and reliable’. Competency in these circumstances is an essential consideration.
The benefit of a business LPA is that you decide who will deal with your affairs on your behalf. You can also place very specific instructions and restrictions upon your attorneys as well as providing guidance on how they should deal with your business affairs.
This can all sound daunting but under the Mental Capacity Act 2005 your attorneys must act in your best interests and follow a code of practice. This includes considering any views and beliefs you have expressed in the past. You can revoke your LPA at any time as long as you have capacity.
Company directors should also review their articles of association to clarify what happens if a director were to lose capacity. The LPA and the articles of association need to work alongside one another.
As a busy professional it is easy to brush these matters aside but as a business owner you have additional responsibilities to consider and a business LPA can give you, your partners, staff and suppliers the peace of mind that your hard-earned success is protected at the worst time.
For advice and assistance on preparing a business LPA, contact one of our Private Wealth experts on 01782 205000 or email email@example.com