Few business owners consider what would happen should they become physically or mentally incapable of running their business. Many think that their business partners, spouses or employees will be able to assist. It may be that you have well drafted documents already in place which specify what should happen. But without considering Lasting Powers of Attorney from a business perspective to legally appoint someone to act then there can be substantial disruption to the day to day running of the business.
Lasting Powers of Attorney are easy to put in place and offer you the opportunity to plan for the worst case scenario. It means that you can choose someone that you trust to legally be able to manage the business accounts, pay wages and invoices, buy stock and enter into contracts.
Careful consideration should be given to your Lasting Power of Attorney
Lasting Powers of Attorney can be powerful documents and careful consideration should be given to who would be the best person to act on your behalf in the business. Would it be your business partner, a family member or both? It is important that the person that you appoint understands the business and the day to day running of the business. Will there be a conflict of interest if your business partner is named as the sole attorney? If you choose to appoint more than one attorney, how should they act i.e. jointly in respect of some decisions and jointly and severally in respect of other decisions?
There is scope to place restrictions and/or guidance in the document to prevent your attorney(s) from doing something or to specify how you would like your attorney(s) to act in certain circumstances. You also have the option to place a restriction in the document so that it may only be used in the event that you should lose your mental capacity. This should be considered carefully. Who will assess whether you have lost your capacity? What if you are physically incapable of managing the business and need assistance?
Sole Traders may need a Court Order without a Lasting Power of Attorney
In respect of sole traders and partnerships, if there isn’t a Lasting Power of Attorney in place and you were to become incapacitated, the only avenue available would be to seek a Court Order. The Court Order would enable someone to deal with the business assets or dissolve the partnership but the process can be drawn out and is extremely costly.
Few business owners think about a Lasting Power of Attorney when considering their business plan. In my opinion, a commercial Lasting Power of Attorney is a vital part of the business and is as important as taking out insurance. To some people, a Lasting Power of Attorney is a form of insurance itself, it is there should it be needed but hopefully you will never have to use it.