As a business owner, it’s essential to plan for the future and ensure the continuity of your business, even in unexpected circumstances. One crucial aspect of this planning is the creation of a Lasting Power of Attorney (LPA).

What is an LPA?

An LPA is a legal document that allows someone to make decisions on your behalf if you lose mental capacity. For business owners, having an LPA in place is like having an insurance policy to ensure the continued operation of their business.

Types of LPAs

There are two types of LPAs: Health and Welfare, which covers medical decisions and personal welfare, and Property and Financial Affairs, which deals with financial matters such as bank accounts, investments, and property. Business owners may wish to have multiple Property and Financial Affairs LPAs to address different aspects of their financial and property affairs.

Separating Personal and Business Affairs

It’s important for business owners to consider separating the administration of their personal and business affairs. E.g. whilst a spouse may be best placed to manage personal assets and financial affairs, they may not be the best choice for handling complex business matters in a business they have had no involvement with. Having distinct LPAs for different aspects of your financial affairs can ensure that the right person (or people) is appointed to handle specific aspects of your particular business. If you have multiple businesses you can have a different LPA for each business.

Safeguarding Business Continuity

For businesses with multiple owners, a comprehensive disaster recovery plan should include provisions for mental incapacity. It’s important to consider who is legally entitled to handle the financial affairs of an owner who loses mental capacity, who would be the most suitable person to make business decisions on their behalf, and whether there is a neutral party who can safeguard both business and individual interests in the event of a conflict.

Appointing an attorney requires careful consideration. The selected individual should have the necessary skills and available time to manage the business interests effectively. It’s also important to ensure that the business’s Memorandum and Articles of Association and any Shareholders Agreement and other documentation align with the chosen approach.

Seeking Legal Guidance

Navigating the complexities of LPAs can be challenging. Seeking guidance from legal experts is highly recommended to ensure all scenarios are considered.