Do I need a Lasting Power of Attorney for my business assets?

A Lasting Power of Attorney (LPA) is a legal document which you can make, giving someone else (called an attorney) the legal authority to make decisions for you when you cannot do so yourself because you lack mental capacity. There is one to govern your health and welfare decisions and another which governs decisions relating to your property and financial affairs.

Most clients make LPAs with a view to their attorneys managing their personal finances. However, it may not always be appropriate for these people to manage your business affairs. They may not understand the intricacies of the industry you operate in and may lack relevant experience or professional qualifications that are needed to continue running your business. So if you are a sole trader, are in a partnership, are a director or are a shareholder with voting rights in a limited company, it is important that you consider making a second LPA limited to your business affairs.

If you are a sole trader this is quite straightforward. As your business is not a separate legal entity to you, you can simply make a new LPA. There will need to be specific provisions included to ensure the LPA only relates to your business decisions so you should seek legal advice for this.

If you operate a business in a partnership, you must first review your partnership agreement to confirm if there are restrictions on an attorney acting on behalf of one of the partners. If you do not have an agreement in place, there is no automatic right for the other partners to make decisions on your behalf and business continuity will be affected. Even if you do not make an LPA, you should make sure you have a partnership agreement in place to ensure that the remaining partners can continue to make certain decisions without the partner who has lost mental capacity.

If you are the director of a limited company, it is essential that you check the company’s articles of association as they will state what is to happen to a director should they lose mental capacity. A director cannot delegate their daily functions even if they make an LPA, therefore, in most cases the articles of association will say that their appointment will be terminated. This being said, directors are often also shareholders in a business and shareholders can make an LPA to ensure someone can exercise their voting rights if they are unable to do so.

If you would like any advice relating to Lasting Powers of Attorney or have any questions, please call our team today on 0113 207 0000.