If you are the owner of a business, thinking about whether your business could survive without you may not be something you have considered before. However, being absent from the workplace can often cause operational problems and threaten the future of the company and yet, in our experience, business owners tend to avoid thinking seriously about the consequences of this.
Have you ever thought about what would happen if you couldn’t make decisions or were unavailable to implement them? You may have to rely on family, friends or employees to take over. But do they know enough to make important decisions? Will they have the necessary authority to act on the decisions or deal with third parties such as the bank?
Think of the following scenarios where decision making would be difficult, or indeed impossible:
- If you are absent due to a holiday or business trip
- If you were to have an accident
- If you were to have a medical condition that resulted in a loss of mental capacity
Many of our clients plan for expected absences such as a holiday or a stay in hospital by executing what is known as a ‘general power of attorney’, giving authority to named people (attorneys) to act in relation to a specified transaction or to make general decisions about the business. However, this type of power of attorney will be automatically revoked if you become mentally incapable of making decisions and therefore isn’t suitable for long-term planning.
A Lasting Power of Attorney (LPA) is usually more appropriate for making long term provisions. An LPA allows you to choose the attorneys you wish to make the decisions and enables you to specify how you wish the business to be taken care of in your absence or if you were to lose mental capacity. If an LPA is not in place and you lose capacity, then it may become necessary to make an application to the Court of Protection to appoint a deputy to act on your behalf. The appointed deputy may not be the person you would have chosen to make decisions.
If you are a Sole Trader, an LPA is particularly useful as you will be the only person who can make decisions about your company, and appointing attorneys will ensure someone else can do this for you. If your business is a partnership, the company partnership agreement may contain provision as to what would happen should one of the partners lose capacity. Similarly, if you are a Director of a company, this may also be covered in the articles of association. However, the LPA ensures that the people you choose are able to run your business in the event that you are unable to, which could be critical for its survival.
For further information about Lasting Powers of Attorney download our information sheet here: httpss://renaissance-test.madebyflawless-dev.com/wp-content/uploads/2017/01/Lasting-Power-of-Attorney-Information-Sheet.pdf