Business lasting power of attorneys: what are they and why do you need one?Published on
Claire Currie, head of the Private Client department at Kirwans law firm, explains that business owners are failing to include a business lasting power of attorney in their crisis management preparations.
There is a lack of awareness among the region’s business community around the importance of making a business lasting power of attorney (BLPA) to ensure their firm could continue to operate if a significant decision maker was to become incapacitated.
Financial LPAs have long been recognised as vitally important for those with any kind of asset, while health LPAs are equally as crucial in order that an individual’s wishes in relation to their health and potential medical treatment are recognised.
However, little attention has so far been paid to this important part of business planning – appointing a lasting power of attorney to ensure the continued smooth running of the business should a problem arise that the business owner is unable to deal with.
In my role as partner and head of Private Client, I spend a lot of time talking to business leaders in the region and I have been genuinely concerned at the amount of people who say they have crisis management plans in place but have not included a BLPA in those plans.
Without a BLPA, a huge amount of risks arise. Say, for example, one of the bank account signatories suddenly becomes incapacitated. The bank would freeze the account in order, meaning that invoices would go unpaid and even wages would be stopped. Paying tax bills could be a problem too, causing potentially long-lasting effects on the business’s credit record that may take some time to sort out.
Even contracts signed by the person could suddenly become worthless, due to their lack of capacity. There would be no overnight resolution to these issues either; instead, an application would have to be made to the Court of Protection to appoint a deputy; a process that could take many months.
Business owners need to invest in an LPA that specifically concentrates on the business so that a suitable person could take over the running of it and implement pre-agreed plans that would be in the best interests of the firm.
It isn’t just company directors who need to safeguard their business in this way; sole traders are also at high risk of business problems and complications should they become incapacitated and they too consider appointing a BLPA. Should the worst happen and a sole trader finds themselves unable to look after their business affairs, invoices and tax will still need to be paid in order to avoid problems.
Many sole traders are the only people who understand what is happening in their business at any one time, and if they are removed from the equation the whole business could go to the wall. The best way to avoid these worst-case scenarios is to prepare for the worse – and then to hope it never happens.
Kirwans has offices in Liverpool and Wirral and represents private and commercial clients across the UK. To find out more about Kirwans, visit its website or call 0808 2531 426.
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