With the festive season in full swing, many of us are focused on decorating, family gatherings, and gift-giving. A Lasting Power of Attorney (LPA) for your business assets is a gift that your business will continue to benefit from for years to come if you can’t be there to steer the sleigh!

An LPA is a legal document that allows you to appoint one or more people to make decisions on your behalf, for instance if you were abroad for a prolonged period or become incapacitated. There are two types of LPA:

1. Property and Financial Affairs LPA: This allows your Attorneys to make decisions about your financial affairs, including managing your bank accounts, property, investments, and business interests.
2. Health and Welfare LPA: This allows your Attorneys to make decisions about your health and care, such as where you live and any medical treatment you receive.

For business owners, the Property and Financial Affairs LPA is the most relevant. An individual may make more than one Property and Financial Affairs LPA, allowing them to appoint separate attorneys for their personal affairs and their business interests.  

Why is an LPA Important for Business Owners?

A well-drafted LPA can safeguard your business interests by:

• Ensuring Continuity of Management: It allows you to appoint a trusted individual or individuals to make important decisions on your behalf with minimal impact to operations.
• Preserving Asset Value: It prevents costly delays and potential mismanagement of your business assets.
• Facilitating Transitions: It ensures a smooth transition of your business interests, whether it be through a sale, transfer, or continued operation by your Attorneys.

Key Considerations

Is a Business LPA right for your business?

• We work closely with our Corporate and Commercial teams to assess whether your business allows Attorneys to act under an LPA and if it is appropriate for your business for them to do so.
• If you are a director of a company, the company’s articles of association may provide restrictions on Attorneys acting for a director and protocols in the event a director becomes incapacitated. Similar provisions may also exist within Partnership Agreements.
• For companies with model articles of association adopted after 28 April 2013, this especially important as the Mental Health (Discrimination) Act 2013 amended the model articles to provide that, where a director has become mentally incapacitated, they will not automatically cease to be a director.
• For sole traders, the general authority for an Attorney under a Property & Financial Affairs LPA will apply to your business, depending on the provisions of the LPA. However, it is important to consider if it is appropriate for Attorneys appointed in a personal capacity to also make decisions for your business.

Choosing Your Attorney(s):

• Trustworthiness: Select individuals who you trust implicitly and who have a good understanding of their responsibilities as an Attorney.
• Business Acumen: While trust is essential, an Attorney must also have strong business expertise and experience. 
• Impartiality: To prevent potential conflicts of interest, an Attorney should be sufficiently independent.
• Availability: Ensure that your Attorneys are available to make decisions on your behalf, especially during critical times.

Defining your Attorneys powers:

• LPAs allow you to provide specific preferences and/or instructions to your Attorneys. We can advise on the wording and scope of these provisions.  
• Granting broad powers to your attorneys allows for flexibility in decision-making, but, if necessary, safeguards can be included to prevent potential misuse of powers.

Common Mistakes

• Delaying the Process: Don’t wait until it’s too late to create an LPA for your business. If you have already lost capacity then you may need to apply to the Court of Protection for a Deputyship Order. This can be a long and costly process for your family and/or business and there is no guarantee that the Court will appoint who you would have chosen to be your Attorney.
• Choosing the Wrong Attorneys: Ensure that you not only select someone with the necessary skills, but with sufficient knowledge of your particular business and how it runs.
• Failing to Review Your LPA: Regularly review your LPA and Attorneys to ensure that it remains current and relevant.
• Neglecting to Register Your LPA: A valid LPA must be registered with the Office of the Public Guardian (OPG) to be effective. If our instructions are for immediate registration, we will register your LPAs with the OPG on your behalf.

To give yourself piece of mind this Festive Season and ensure your business assets are protected, please contact us to speak to a member of our Private Wealth and Inheritance Team who will be happy to assist you.