Putting the power in your hands to protect your business
BUSINESS owners risk “a ruinous financial hit” if they fail to take the proper legal steps to safeguard their company’s future in the event of losing their mental capacity.
This may be a physical issue but is more often intellectual deterioration on a spectrum from memory loss to profound dementia.
One of the most important protective measures they can adopt is a Lasting Power of Attorney – but many fail to do so.
Put simply, it could make all the difference to whether their business continues – or collapses.
An LPA is a legal document that allows business owners to nominate and authorise a person of their choice to make and implement decisions on their behalf.
This person – somebody they trust, and who knows their business – is known as their attorney.
With this hugely important document in place, business owners can be certain that management of their business could continue even if they lost the capacity to make decisions yourself.
While it can be a physical issue, incapacity is more often intellectual deterioration on a broad spectrum spanning memory loss to profound dementia.
In most cases, mental incapacity strikes randomly and advances with age.
Without an LPA in place, there would be no one with authority to take control of the running of the company.
When setting up a business, whether as a sole trader, partner or director, the focus is understandably on the bottom line – and not on the possibility of losing mental capacity.
But, with company bosses increasingly finding themselves in that position in record numbers, many are unprepared for what would happen if they became incapacitated. And who would manage the running of their business so it survives – and thrives.
Many assume that a family member or other member of the business will be able to assist – but this is simply not the case.
This is a dangerous assumption to make as no one has an automatic right to deal with a person’s business affairs and so, without the legal authorisation required, the effects could be huge and far-reaching.
Documents could go unsigned, contracts lost, staff unpaid, and accounts inaccessible.
Many banks would freeze business accounts if they became aware of a signatory losing capacity. In turn, this would have a drastic negative effect on the day-to-day running of the business..
No business owner wants to experience or risk these issues and therefore needs to have a robust continuity plan.
A key part of any such continuity plan is the implementation of a business LPA to prevent a business being exposed to risk.
By creating and registering a business LPA, business owners can choose who should manage their business finances, assets and affairs if they became unable to do so.
Many should already have a personal LPA in place but, as a personal attorney is often not someone who would be qualified to run a company, they also need to have a separate LPA that relates specifically to the business.
Clearly the chosen attorney needs to have the necessary knowledge, skills, qualifications and experience to run a business and also they need to be someone who is trusted implicitly to make the decisions as the incapacitated business owner would do.
For this reason, when dealing with partnerships, it is most common to appoint another partner within the business to be appointed as attorney.
For sole traders who lose capacity it would not take long for the business to crumble if there was no one else authorised to manage the same.
Appointing an attorney ensures business continuity, should capacity be lost.
It should also be born in mind that in the event of a serious injury, business owners might lose capacity for a period of time but could regain this as they heal.
With a business LPA in place, someone would be able to continue to management of the company whilst the owner is unable to do so. Then, when he or she wasready to return, the business would still be up and running which would be very unlikely without an LPA.
For those in a partnership, it is necessary to check the partnership agreement as it may already make provision for a partner lacking capacity.
If not, or if further provision is required, then a business LPA would need to be set up and advice taken on its wording so as not to conflict with any provisions that are already in place.
For directors of a company this would also apply to the articles of association.
If a business owner does not have a business LPA in place and you lose your mental capacity then an application for a deputyship order would have to be made with the Court of Protection. This is an expensive and very lengthy process and business owners will have no say in who is appointed to make decisions for them.
This is not a satisfactory outcome for any business owner and, in the months it would take to appoint a deputy, a business would be at risk and would likely take a significant, if not ruinous financial hit.
“Straightforward and practical advice with very transparent pricing – a refreshing change from a solicitors! Simon Bass was both supportive legally and personally after a recent bereavement, as well as being a lovely chap with it.”
“Milners solicitors dealt with my needs efficiently, friendly and professionally. I wouldn’t hesitate in recommending them to anyone.”
Milners solicitors is always working to help our clients. Researching current issues and providing clear and easy to understand help.
Everyone knows about ‘divorce’, from the allegedly “quickie” divorce to the “divorce battles” and now a new divorce – “No Fault” But what does this all mean? Is this really a new concept? Until 1857, divorce was largely available to men and the rich as divorce could only be granted
This year Family Mediation Week is taking place from 17th until 21st January 2022. Its aim is to raise awareness of family mediation and the benefits it can bring to separating families. Over the course of the week, the Family Mediation Council will be hosting webinars, publishing resources, information, blogs
Good Divorce Week is an annual campaign organised by Resolution and this year, it is taking place from 29th November until 3rd December 2021. Resolution is a community of family justice professionals who focus on working with families to promote an amicable approach to separation. Members of Resolution include solicitors,
We’re delighted to welcome Mark Hilton to the team at Milners. Mark has been advising on construction issues for over 30 years, primarily in relation to contentious matters but also in relation to complex contractual negotiations. Mark is an experienced litigator and international arbitration lawyer and has acted for contractors,
COVID Business interruption claims And so following the city’s heavyweight lawyers brawling through the courts ( with Messrs Herbert Smith for the Financial Conduct Authority or FCA, Simmons and Simmons for the insurers ) we finally have a verdict. It’s not a knockout blow but a very good points decision
As the true impact of the Coronavirus COVID-19 pandemic continues to be realised, so does the severe impact on BAME communities – further evidence that Black Lives Matter. Every year, the UK comes together on June 22 to honour the British Caribbean community and the contribution it makes to
Milners Solicitors is offering 25% off all legal fees to NHS and Key Workers for any new instructions received on or after the 22nd May 2020 until further notice.
Milners Senior Partner, Giles Ward, sees his latest article on advising businesses how to take steps to survive the COVID-19 pandemic featured in the latest issue of Pest Contol News. You can read the article here: PCN 122 Milners Article
Ben Harrison – Head of Public Law at Milners featured in the Yorkshire Post with his thoughts on the potential for a public inquiry into the handling of Coronavirus here in the UK. Read the article here: https://www.yorkshirepost.co.uk/news/opinion/columnists/public-inquiry-governments-handling-coronavirus-crisis-inevitable-ben-harrison-2851044 Public
Leeds-based solicitors, we also have offices in Harrogate and Pontefract but operate throughout Yorkshire and further afield.
Let’s work together.
At Milners solicitors we offer a free initial consultation where you can speak to a member of our specialist team.