Business owners are busy people and running a business can take up a lot of time. Business owners are often so busy running their business that thinking about a time when you might not be able to run your business because of illness is often overlooked. It is probably the last thing on your mind. We take out car insurance, home insurance and critical illness policies, all to cover events we hope will not happen “just in case”. Like a car insurance or Key Person Insurance Lasting Powers of Attorney (LPAs) are another form of protection or insurance and are good to have in place should you lose capacity unexpectedly through illness or accident. It addresses the qustion, who would take over the day to day running of my business?
Most people associate Lasting Powers of Attorney (LPA) for personal use but this is not the only use. If you’re a company director, partner or sole trader, it’s in your best interests to ensure you’re protected. Many businesses operate as sole traders or with one or two directors. If anything happens to one of these individuals and they are incapacitated the running of your business could be seriously affected. Even if you have two or more directors, these directors may not automatically be able to continue running the company. It is a good idea to check your companies articles to see how many directors are needed to make company decisions. If there are not enough directors, then your company may have a problem. It makes sound business sense to review your company’s documents as the steps to be taken in the event of one of the director’s incapacity. What you can do in those circumstances is often governed by the company’s articles of association and an LPA on its own may not be sufficient.
When it comes to paying bills, most companies invoice on either a 14 or 28 day basis. If a director is unavailable for more than two weeks creditors would soon start to demand payments. If the director is unavailable for 28 days or is unable to sign cheques or transfer money electronically, on day 29 creditors will ofter consider what actions to take regarding outstanding invoices.
Many companies have business loans or mortgages through a bank. If one of the directors is incapacitated for a period of time, banks will consider whether to pursue recovery of their loan or outstanding mortgage. They may consider freezing your company’s bank accounts, as one of the directors is no longer able to function or sign as a director. Also it is common for many companies to use personal assets as guarantees against business losses. Usually it is your home, or some other person’s home (with their permission) or other valuable assets. If you cannot participate in company decision making, your company could face liquidation, your creditors may look beyond company assets to any assets held as guarantee. This may result in you losing not only your company but your home as well.
Appointing an attorney
Who or how do you choose attorneys? LPAs allow you to appoint a chosen family member(s), trusted friend(s) or (in the case of property and financial affairs) a professional person. Idealy a professional person should be familiar with the type of business you run. Appropriately drafted and registered Property and Financial Affairs LPAs are not just for the difficult times, they can be also used while you still have capacity so your attorney could act, for example, if you took a much needed holiday (if you are lucky enough to have the time to take one!) and decisions needed to be made or signatures required. If you are in a business partnership, it would make sense for the partners to appoint each other as attorneys.
Financial decisions your attorney can make
• Buy and sell property.
• Organise property insurance and repairs
• Access your bank statements
• Open and close bank accounts
• Invest your assets
• Deal with your tax affairs
All of the above point identify the level of exposure to risk your business could face. If you want to protect your interests, those of your company and your family, you should consider making a Financial LPA for your business. If you don’t have an LPA in place and you have lost capacity you would need a Deputy appointed which can take several months to arrange. The cost of not having one in place is much greater than the making of Lasting Powers of Attorney. The Court of Protection will appoint a deputy to deal with your affairs. The person appointed may not have been the person you would have chosen and this process also takes some time with a financial burden far higher than the cost of putting an LPA in place. In the meantime, the business may suffer.
If you would like expert advice on making Business Lasting Powers of Attorney the contact Eilish Adams on 020 8899 6620 or email her at firstname.lastname@example.org