Being prepared for any eventuality is vital if you run a business. Here, we take a look at just what a Business Lasting Power of Attorney involves…
Business Lasting Power of Attorney
Last month we looked at how you should have a plan in case you are incapacitated and need someone else to take care of your financial affairs via a Lasting Power of Attorney. We touched on the matter of a Business Lasting Power of Attorney (BLPA), but here we will go into more detail.
Why do I need a Business LPA?
Do you run a business or play a major role in the running of a business? Do you have access to the business bank account? If so, what would happen if something happened that rendered you unable to make business decisions – through illness or an accident?
It is a common misconception that should a business owner no longer be able to deal with the running of the business, a family member or employee would automatically be able to run the business. However, they may not have the authority to do this and if no Lasting Power of Attorney is in place, an application to the Courts to appoint a deputy to act may be required – this can be a time-consuming and expensive process.
None of us like to think about the worst happening, but it makes sense to be prepared. Not only does it mean that your business can continue to operate while you are incapacitated, providing you with the financial security that will be more important than ever, but it takes away extra stress from the business and family at a time when they need the most support.
Having a BLPA in place ensures that your business affairs will be handled by someone that you trust. You can choose someone who understands how your business works and who you know will be able to handle day-to-day affairs as you would wish.
What could happen if I don’t have a BLPA?
If you are unable to make business decisions, and have no Business Lasting Power of Attorney in place, there are a number of things that can happen:
- Frozen bank account: This might stop wages being paid to your staff and tax payments to cease. The bank may even recall loans and mortgages. If you are the recognised signatory on the business account, you would need to give permission to add or change signatories for the account – if you are not capable of providing permission, the matter would have to go to court – which would cost time and money.
- Contracts voided: Existing contracts could be voided, and your company may not be able to enter into any other contracts, possibly bringing your business to a grinding halt.
- Enforceable contracts: If the business enters into contracts when your mental capacity is compromised and the third party is not aware of this, they could enforce the contract against you – putting your business and its assets at risk.
- Regulatory breaches: Is your business regulated? Your professional body could get involved if you no longer have the capacity to run your business within regulations.
- Statutory breaches: Because directors, LLP members and partners have statutory obligations to protect and assist a fellow partner who lacks capacity, as well as a responsibility to act in the best interests of shareholders, this could all be compromised.
- Insurance: Your cover may be compromised, especially if you are unable to give appropriate advice for clients in a professional capacity.
- Negligence: Claims could arise if you are no longer able to take care of professional liabilities and responsibilities.
So what can a business lasting power of attorney do for me if I’m a…
They can ensure any staff are paid. They may also help to avoid business overdraft or loans being recalled, which otherwise could place your family under financial pressure. They could also authorise money being moved from your business account, into a family account if needed, and authorise tax and other outstanding payments to be made, avoiding financial penalties.
A BLPA is authorised to amend the company articles of memorandum, enter into contracts, control the bank account and acquire loans and overdrafts. They can also delegate their authority to a third party where necessary and even accept new directors or dismiss existing ones.
In a Partnership/LLP?
A BLPA could do everything mentioned already, but also amend the partnership agreement, accept or dismiss partners and issue receipts for their profit share. They could also sign off or challenge end of year accounts and enforce decisions about partnerships, liquidation, and LLP sale.
How to register a Lasting Power of Attorney
An application for a BLPA is made on form LP1F (this is the same form used to deal with personal property and financial matters). You can find the relevant forms on the UK Government website.
It is essential to get professional advice before registering an LPA.
If you would like to discuss setting up a Business Lasting Power of Attorney or any other financial matter, J Finance will be happy to help. Please contact your adviser without obligation.
Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. We serve clients across England and Wales. If you would like to discuss this subject or any other financial matter, please contact us on 01635 521 300 or email firstname.lastname@example.org.