Business Lasting Power of Attorney
An individual who has a self employed business or is the sole director of a company can make a Business Lasting Power of Attorney. If subsequently they should they lose mental capacity or become injured or unavailable, the persons they have nominated will be able to make business decisions on their behalf. This allows the business to continue. The individual is the 'donor' and the persons they nominate attorneys are their 'attorneys'. The attorneys are legally required to act in the donor's best interests and have a duty of care.
The attorney or attorneys would be chosen by the donor, taking into account relevant factors, for example, their reliability and trustworthiness, their business skills and their experience in managing a business. It is not uncommon for a donor to appoint two attorneys, one of whom is their spouse or partner.
The LPA would specify that the attorneys
must make decisions jointly or alternatively that they can act jointly
and severally, which allows each attorney to act on their own.
The 'jointly and severally' option provides greater flexibility. For example, the donor's business LPA may specify certain key decisions, such as whether to take on a member of staff and whether to sell the business, that have to be made jointly (requiring both attorneys to agree), whereas on other business matters, the attorneys can make decisions individually.
With the LPA in effect, the attorneys would be able to manage the
business and make contracts for the sale and purchase of goods and
services, collect monies, pay bills and authorise payment of wages to
employees. Having the LPA in effect should remove the risk of the bank
freezing the business bank account.
The attorneys would be in place to see to the business meeting its legal and contractual obligations. They also could take actions to protect the interests of the business. Having the LPA attorneys in place may protect the good standing of the business insofar as customers and suppliers are concerned.
The donor can put instructions in the LPA about what the attorneys can and cannot do. The LPA can also include the donor's preferences with regard to the decisions that the attorneys make. Instructions are binding. Preferences are not binding, so allow the attorneys more flexibility in the way they make business decisions.
If the donor wants to have a degree of support while they have capacity, having a business LPA in place would allow the attorneys to
make decisions on the donor's behalf. The donor's wishes would have to be respected.
This could be part of a phased approach, involving the donor taking time to familiarise the attorneys with the business and the donor's goals for the business. It might be the situation of the business owner having an accident or suffering an illness that makes them temporarily unable to run their business or that they will be travelling overseas for an lengthy period or that they have decided to semi-retire.
A person who is self employed or a director of a company, may view making a business LPA as a measure towards the continuity and stable management of the business.
For information about having a Business LPA prepared, tailored to your particular circumstances, please contact us.