The Need for LPA For Your Business Is Now
Any successful, long-living business relies on consistency. After a rise in mental health statistics in 2016, more light is being shone on the need for ensuring that correct practices are in place to safeguard not only your future and your families but also your business. What would happen if unfortunately, you suddenly lost the mental capacity to function in your role?
Sector dependant, this could obviously leave you, your staff and your business in jeopardy. What’s worse is the aftermath of the hassle caused to colleagues, friends or family who will struggle to gain control of your financial and decision-making power.
In this eventuality, a property and financial affairs lasting power of attorney (LPA) will grant a selected person, people or attorney to look after things for you. If you fail to get this LPA in place, it will mean the person that will attempt to take over, will have to apply to the ‘Court of Protection’ to obtain an ‘Order of the Court’. The judge at hand would then have to make the executive decision on who should take care of your property and finances. A process that could take months and cost thousands, which could greatly harm your business’ future.
So How Exactly Will It Affect Your Business
- Sole Trader
This is when the LPA is most vital. As a Sole Trader, your business will have zero legal status separate to yourself as the owner, meaning the business relies on you and only you. Without one in place, your family will be unable to either maintain the business or bring it to a close properly. The will result in a limbo status until control is granted (typically can 6 months). By this time, rent, bills or payments will still be due and given they are personal debts of the trader, this could lead to bankruptcy.
Mental incapacity effects will ultimately vary on whether a business partnership agreement has been settled. Like the sole trader, as you’re not incorporated the business doesn’t have a status different from the owners. Therefore, a strongly written agreement – if done correctly – will outline the exact procedures should unfortunate circumstances arise.
If an agreement isn’t in place, an LPA will enable your solicitor at hand to manage the business with only a short break in continuity, which will also help your co-partner continue in their daily obligations.
If on the other hand, if you have no LPA or agreement, your life partner won’t be able to control your business affairs or even make decisions for you. Assets according, will be given out dependent on your will so if you haven’t already, seeking to will solicitors to get this in place is a must. As you’ll have guessed, inactiveness will only cause damage to the business and your finances.
- Limited Company
If you’re working out of a limited company then more often than not, dual roles of a director and a shareholder and what happens in the case of incapacity will depend on the conditions of the shareholder’s agreement.
An LPA works effectively in relation to shareholders where an attorney who is appointed from an LPA can deal with the shares that are held by you. However, when it comes to the director side of things, as directors aren’t allowed as a matter of law to delegate their role, responsibility and duties under a power of attorney. As a result, directors will need to rely on fellow directors in cases when there are several multiple directors.
If you’re a sole director you’ll need to taken into account what will happen to the health of the company from a day to day operational point of view is something unexpected were to occur and whether you have pre-signed forms appointing an alternate director that can be used in certain situations.