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Business continuity planning may range across various disaster scenarios – from cyber-attack to fire or flood – but you can overlook the obvious, which is how the business will cope if the owner isn’t available to manage financial matters and decision making. 

A simple solution is for the business owner to make a Lasting Power of Attorney and appoint someone to look after their financial affairs and act on their behalf. Shareholders, partners and sole traders can all benefit from appointing an attorney in this way. 

An LPA can enable day-to-day management when the business owner is not available – such as being overseas or incapacitated following an accident – but is able to give instructions to the attorney.  It also safeguards for a more serious situation, where someone loses mental capacity and is unable to make decisions themselves, at which point the attorney can stand in.

Where no one is authorised to run the business and its finances, day-to-day operations may be impossible and the business even crippled. 

In the worst-case scenario, where the owner lacks mental capacity and there is no LPA in place, affairs will have to be managed by a deputy appointed by the Court of Protection.  This can be slow and expensive, taking up to six months to appoint a deputy and with the Court then having to grant permission for transactions, a situation which could see a business failing before financial matters are resolved. 

The impact may be felt with the bank, who can freeze accounts if an account signatory lacks capacity.  Similarly, some contracts may become unenforceable if the person who entered into the contract now lacks capacity.  It can have an impact on the business owner’s family as well, if they are reliant on income from the business.

And even where it is just a temporary issue, with the owner out of contact or out of action for a short period, simply paying creditors or wages can become difficult, and contracts may be lost.

 

“When people think of an LPA, it is often in terms of being for older people, who want to have someone in place to manage their personal affairs or to make health decisions if  dementia sets in, but LPAs have a place in both business and personal life, at every age. By appointing a business attorney under an LPA, and registering it with the Office of the Public Guardian, business owners are taking a simple step, but one with far-reaching benefits for safeguarding their enterprise,” said Carol Wycliffe-Jones, associate solicitor in the private client team at Wollens.

 Carol added: “While it’s a simple process, it is crucial to consider carefully who you are appointing as your attorneys and whether you wish to place any restrictions on what they can agree on your behalf while you are mentally capable.  Because it can also impact on aspects such as the articles of association in a limited company or partnership agreements, it’s also important to get professional advice to avoid contradiction.”

Once an LPA has been made, it must be registered with the Office of the Public Guardian before attorneys can act, with a fee of £82 per LPA.  It can then be submitted to any institution such as a bank or utility provider, enabling the institution to deal directly with the appointed attorneys.

There are two kinds of Lasting Power of Attorney – one covering financial and property affairs which can be used for both business and personal affairs, and another covering personal health and welfare.  Where a business owner decides to do an LPA for financial and property affairs, it is worth considering having two separate LPAs for business and personal finance, as the decision on who is a suitable attorney may be quite different and will enable a clear role to be specified. 

For any advice you need in this area please contact Carol at Wollens solicitors  – carol.wycliffe-jones@wollens.co.uk