Business Lasting Powers of Attorney (BLPA)
Unfortunately, it is the harsh reality that those who are involved in business sometimes experience incapacitation whilst in a position of power, within a company. This poses risks towards that business, as a person in control can no longer make vital and day-to-day business decisions.
In the event a business owner loses capacity, it could lead to the business becoming ‘frozen’ and this can pose difficulties for debtors and creditors amongst other issues. Alas, not everybody knows or understands what BLPAs are and what security they provide for businesses.
What are BLPAs?
BLPAs are legal documents which authorise a person/people (Attorney/s) to make decisions concerning their business interests when they lack mental capacity or are unavailable.
Why do you need a BLPA?
If you have an accident, lose mental capacity or even go on holiday, an BLPA provides a person/people of your choice to look after your company affairs. This adds a level of security to your business and peace of mind knowing your business will continue to operate should the worst occur.
Accordingly, if there is no plan for someone to deal with company affairs, this could expose your business to risk, or even worse legal disputes:
“A partner might in certain circumstances be liable in damages to his firm… the standard… which required the exercise of reasonable care in all the relevant circumstances.” – as per Lord Hamilton in Ross Harper & Murphy v Banks [2000] S.C. 500.
This is critical, as if someone thinks a BLPA is not needed, they may be liable for losses should they lose capacity without making a BLPA or necessary provisions.
What’s more, without BLPAs, the court may order a Deputy to be appointed as Director. This may not be the best person for the job, it can take around six – nine months for them to be appointed and could lead to company bank accounts being frozen in the interim.
Separating personal Financial Affairs LPAs and Business LPAs
The people who are best placed to look after your personal financial interests are rarely the right choice to also manage your business. Running a business requires a level of skill and knowledge of that particular business. Allowing it to fall into the control of someone with no experience of said business can be detrimental and can lead to unfavourable consequences.
Denzil Lush, Senior Judge of the Court of Protection supported this statement in which only a single Property & Finance LPA was created in Eld LJ 144 [2013]:
“…Cases where the donor should have made two LPAs: one for their business affairs and the other for their personal affairs.”
Separation clauses
Separation clauses can be effective within LPAs, as they can include/exclude matters, such as: “The Attorney(s) appointed under this LPA are only authorised to make decisions relating to [business] [Co.]” This can be practical if a donor wants to divide powers amongst the Attorneys and only allow them to make decisions about particular parts of the business they have expertise in.
Considerations
It is imperative to ask yourself: “Could my Attorney do all of this”? The importance of this question is whether you want your business to survive, as BLPAs are future proof. Your Attorney should be someone who can step in and control your business matters competently. This is often overlooked when a Donor creates a Property and Financial Affairs LPA; a BLPA is more specialised and essential to securing your business.
By signing a BLPA, an Attorney is confirming that they are willing and able to take on responsibility for the company. This is preferable to the situation in which an Attorney of a Property and Finance LPA is tasked with running a company despite no experience in the area.
Comparatively, it is worth noting that choosing Attorneys may create business conflicts.
For people with significant control (PSC), a letter to Companies House is a useful courtesy informing the state of their appointment. In comparison, professional Attorneys should register under the Disclosure and Barring Service and business Attorneys may need to register with the Information Commissioner’s Office (ICO).
However, the most important consideration is that the Attorney must have sufficient capacity to act in accordance with S.2 and 3 of the Mental Capacity Act 2005.
How can we help?
When you submit this form an email will be sent to the relevant department who will contact you within 48 hours. If you require urgent advice please call 01202 525333.
