Could Your Business Survive If You Became Incapacitated?
Every business owner, director, partner or sole trader should prepare a Lasting Power of Attorney as part of an effective business continuity plan.
As a business owner I’m sure you have considered what would happen in the event of your death and probably think that you have everything covered by insurance policies. However have you ever considered what might happen to the business if you should be unexpectedly incapacitated by illness or injury? Who would take over the running of the business and its finances, and what would it mean for your employees?
Unless you have appointed an attorney, fundamental business operations may not be possible – access to bank accounts may be denied, suppliers won’t get paid, contracts could be compromised or lost, insurance premiums won’t be renewed, and salaries could go unpaid.
The best way to ensure that your business can continue as normal in your absence is to prepare a business or commercial Lasting Power of Attorney (LPA). This way you can appoint an attorney to deal with business matters and ensure business continuity in the event of you being unable to work.
A Lasting Power of Attorney is a legal document which allows you to give another person (your attorney) authority to make decisions on your behalf. A property and financial affairs LPA should be considered a vital element of your business continuity planning and once it has been registered with the Office of the Public Guardian, it will allow your attorney to deal with the property and finances of the business in circumstances where you are out of the country or in some way physically incapacitated, as well as if you were to lose mental capacity.
If you lose capacity and do not have an LPA, it may become necessary for an application to be made to the Court of Protection for an order appointing someone else to act on your behalf. This can be expensive and time consuming and any delay can have a catastrophic effect on your business.
The first step in preparing a business LPA is a review of the company’s articles of associations, and partnership or shareholder agreements. There would be little point in preparing a business LPA that was contrary to your company documents but it is possible to amend them to reflect your wishes in your LPA.
You will then need to identify a suitable attorney. This should be someone you trust and is familiar with the business and who you know is capable of doing the job how you would want it done. They should also have a similar outlook and knowledge of the market and business as you. You may need to consider preparing two LPAs one to deal with the running of your business and one to deal with your personal matters as the same attorney may not be appropriate for both roles.
Once in place, the LPA will allow your attorney to make financial decisions on your behalf, including buying and selling property, organising property insurance and repairs, accessing bank statements, opening and closing bank accounts, investing assets, and dealing with tax affairs.
Before your attorney accepts their role, ensure they fully understand the responsibilities. For example they must take out their own personal liability insurance to ensure they are protected whilst acting on your behalf, and commit to follow health and safety regulations and company policies too.
If the worst were to happen, your business will be in a much better position if you have an LPA in place. So having an LPA should be the cornerstone of an effective business continuity plan. It makes good business sense to follow this advice. If you would like to discuss this further or wish to arrange an appointment please contact me here at Fieldings Porter on 01204 540900.