Business Succession Planning series – 2 - BTWC

Reasons for having a Business Lasting Power of Attorney.

Helping a client implement a Business Lasting Power of Attorney (LPA) specific to their business could be one of the most important and helpful things you could possibly do for them.

Many people are so caught up in their business activity and driving growth that the future long-term perspective is sometime lost a little, and yet this lack of focus could jeopardise years of hard work.

A Business LPA, quite simply, will allow your client(s) as a business owner/partner to appoint someone to make key business decisions if they are not able to in circumstances such as;

  • If they were abroad on holiday or on business
  • They were to have an accident
  • They developed a medical condition that incapacitated you

 

A Business LPA (also known as a commercial LPA) quite simply will allow your client(s) as a business owner/partner to appoint someone to make key business decisions if they are unavailable or lack mental capacity which will put the business at risk.

Creating a Business LPA.

A key reason for implementing a Business LPA is to help ensure a business can continue to operate smoothly when need be, but it’s essential that the right Attorney is selected.

When selecting an Attorney there are a number of considerations that your clients should bear in mind:

  • Can the chosen attorney be trusted to make the right decisions for the business? Do they have a long-standing relationship with your client?
  • Or does your client wish to choose an independent professional such as a solicitor?
  • If a client has a personal LPA, they do not have to select the same attorney for their business LPA. In fact this maybe best as there could be a conflict of interest
  • Do they have the professional knowledge, skills and capacity to step in and make necessary decisions?
  • Are they legally eligible?
  • Would their appointment as Attorney cause any possible conflict, with family, for example?
  • Is the attorney clear on what their role and decision making covers – powers can be limited.
  • Are other business partners aware of the LPA being in place?

 

The type of business.

The type of business your client has may impact on the terms of a Business LPA and the following should be considered:

Sole Traders

As an individual based business having an LPA is advisable as the risk exposure is potentially huge if your client loses capacity as there will be no one to pick things up and progress the business in a legal capacity.

Partners (general and limited partnerships)

Your client will need to consider their partnership agreement they have in place, as this may already have provisions in place regarding lack of mental capacity. It’s recommended all partners implement a Business LPA to avoid future conflict and possible claims. There may also be various legal implications for consideration as part of the partnership.

Company Directors

A Business LPA may be particularly useful in this instance in order to protect against future discrimination and to safeguard the individuals’ business interests. But there may be additional terms of agreement to take into consideration, such as the fact that the Attorney may not be able to fully take over the Director role without Board approval.

If you’re client is a director of a company, check the company’s articles of association as this may make some provision in the event of a director losing capacity for instance. However, if your client is a sole director of a private company the articles of association, if in existence are unlikely to make adequate provision and in such circumstances a business LPA will be beneficial.

 

A Business LPA in many circumstances can provide long-term protection for the interests of the individual but also for the continuance of the business. No LPA will only mean delays in decisions, possible limited access to funds and potential negative or discriminatory behaviours by other interested parties, all putting the future of a business at risk.

 

To have the opportunity to speak with your clients about implementing a LPA, just get in touch with BTWC and we can help ensure you have all the information, documentation and guidance you need to help your clients, just call us on 01522 500823.