Business owners must have the capacity to answer ‘what if’
Our corporate team are advising business owners to make a Power of Attorney solely relating to their business, in order to protect it, should they become ill or incapacitated.
The Covid-19 pandemic has bought the ‘what if I’m unable to run my business due to illness’ question to the forefront of many people’s minds, and the only way for a business to keep running smoothly when an owner becomes ill and or loses capacity, is to put a Power of Attorney in place.”
Power of attorney for business owners
A Power of Attorney is a legal document that allows someone, while they still have full mental capacity, to nominate a trusted person to make financial decisions on their behalf, in case they lose capacity.
Susan added: “A Power of Attorney is the only way to choose who will deal with your business affairs if you are unable to do so. We have found that business owners may well have a Powers of Attorney to deal with their personal property and finance, but not considered if this person that they have appointed as Attorney, is the right person to run their business affairs. This person needs to have the skills, experience and knowledge to keep the business going if they are unable to make day-to-day decisions, so it’s essential this is thought through and planned for.
“We have had first-hand experience where clients who have been sole directors and shareholders of businesses did not have a Power of Attorney in place and unfortunately, the companies had to fold, as it was impossible for those left in the business to pay staff, rent and monies due on contracts.
“A general Power of Attorney would deal with the immediate situation of incapacity due to illness, but a Lasting Power of Attorney is a better option for most business owners as it would take over if the business owner became incapacitated on a longer term basis.”
In addition to putting a Power of Attorney in place, LCF Law is also advising business owners of some simple steps that they should take to avoid business disruption if they were to suddenly become ill. These include reviewing who is on the bank mandate and ensuring that there is more than one signature.
Susan added: “It’s essential that more than one signature is on the bank mandate, but unfortunately there have been cases where even if there is more than one signature on the bank mandate, once the bank becomes aware of the incapacity of one signatory, they have cancelled the whole of the mandate, which is when a Lasting Power of Attorney would be effective.
“It’s also really important to ensure that online banking details are available to someone else, or that they at least know where to find them, its sounds obvious, but often this information is in the hands of the business owner only.
“Reviewing who has authority to make the day-to-day business decisions, whether they are a sole trader, partner, in a limited liability partnership or sole shareholder and director, must also systematically be run through and documented. Its good practice for a business owner to go through the process of considering specifically what would happen if they were ill or incapacitated, and this is best done with a professional adviser, who can make sure everything is covered off step by step.
“A Lasting Power of Attorney is not about handing over control, it’s about protecting the business. A nominated Attorney can step in to make key decisions and ultimately keep the business running, which is vital. The Office of the Public Guardian rejected nearly 22,000 applications for Lasting Power of Attorney (LPA) in England and Wales in the last 12 months to April, according to a Which, so it really is best to get legal advice when creating this vital document.”
Here to Help
For further information LCF Law’s Corporate Team can be contacted via telephone, Zoom, FaceTime and WhatsApp, or email Susan Clark at ku.oc1603317053.fcl@1603317053kralc1603317053s1603317053