By Kathryn Wheeldon, Head of Private Client at Banner Jones Solicitors
Most businesses insure their buildings, equipment and other assets in case something goes wrong. But what about the people who make the key decisions? What happens if a business owner or director suddenly becomes unable to act – due to illness, an accident or even being away on holiday?
Without someone legally appointed to step in, even temporarily, crucial decisions can be delayed or missed. This can seriously affect the future of the business.
What is a Business Lasting Power of Attorney (LPA)?
A Lasting Power of Attorney (LPA) is a legal document that allows someone (the donor) to appoint another person (the attorney) to make decisions on their behalf if they’re unable to do so.
A Business LPA works in the same way but specifically covers business matters. It can be used:
- Temporarily – for example, if the business owner is travelling or unwell
- Permanently – if the owner loses capacity due to illness or injury
Types of LPA
There are two standard types of LPA for individuals:
- Health and welfare
- Property and financial affairs
A Business LPA, meanwhile, gives someone the authority to make decisions about the running of the business. It’s important to appoint different attorneys for personal and business LPAs, as the responsibilities are very different. A business attorney should have the skills and knowledge to step into the donor’s role and follow clear instructions about what they’re allowed to do.
Who should consider a Business LPA?
A Business LPA is especially relevant for:
- Sole traders and self-employed individuals – as they are the business
- Company directors – if a director’s incapacitation isn’t addressed in the Articles of Association or Memorandum of Association
- Business partners – where partnership agreements don’t cover incapacity
If a company has multiple directors and one loses capacity, the others may want to remove them. However, under the Mental Health (Discrimination) Act 2013, a director can’t automatically be removed due to mental incapacity. Specific clauses must be included in the Articles of Association to allow for this – and we can help review and update these documents.
For businesses with only one director, or sole proprietors, a Business LPA is even more critical. It allows someone to step in and make decisions, ensuring the business can continue, be sold or wound up properly.
Choosing the right attorney
Anyone appointed as a business attorney must:
- Understand the business and its direction
- Be capable of making informed decisions
- Be trusted to act in the best interests of the business
It’s also wise to discuss the Business LPA with other directors or partners so everyone understands the arrangement and the attorney’s role.
Getting professional advice
Setting up a Business LPA involves more than just filling in a form. It’s essential to review your company’s Articles of Association and any partnership agreements to make sure everything aligns. Working with our LPA experts, our Business Legal Services team will guide you through the process and include these reviews as part of the service.
For further advice, contact info@bannerjones.co.uk or call 0333 200 2301
