What Every Business Owner Needs to Know About a Lasting Power of Attorney for Business

What would happen to your business if you couldn’t make decisions?

For many business owners, the company depends on them to function, from signing contracts to paying staff or managing finances. If illness, an accident, or a sudden medical condition affects your ability to act, who would take over?

A Business Lasting Power of Attorney (LPA) allows someone you trust to legally manage your business affairs if you become unable to do so. It’s a practical step to ensure your business keeps running smoothly, your employees are paid, and your company’s interests are protected.

In this guide, we explain why every business owner should consider a Business LPA, how it works, and what you should think about when setting one up.

Key Takeaways

• A Business LPA gives trusted individuals the legal authority to make business decisions on your behalf if you lose capacity.
• Without one, your business could face disruption while waiting for the court to appoint a deputy, a process that can take months.
• When setting up a Business LPA, it’s vital to review company documents, choose experienced attorneys, and provide clear guidance on how they should act.
• A Business LPA can also be used temporarily, allowing trusted attorneys to manage your business while you’re undergoing treatment or otherwise unable to act.

Understanding Business LPAs

A Lasting Power of Attorney is a legal document that authorises one or more people (called attorneys) to make decisions on your behalf. In business, that can mean managing finances, signing documents, or handling day-to-day operations if you’re unable to.

A Business LPA focuses specifically on business matters; it’s separate from a personal LPA that deals with your property and personal finances. It ensures that, if you’re suddenly incapacitated, the business can continue to operate and key responsibilities are still carried out.

Importantly, a Business LPA isn’t only used when you’ve permanently lost capacity. It can also be activated temporarily, for instance, if you’re undergoing medical treatment, recovering from surgery, or otherwise unable to manage business affairs for a short period. This flexibility allows your appointed attorneys to step in and keep operations running smoothly until you’re ready to resume control.

This might include:

• Accessing business bank accounts.
• Signing supplier or client contracts.
• Managing payroll and staff issues.
• Making financial or operational decisions.

Having a Business LPA in place offers peace of mind that your company won’t be left in limbo, and that decisions will still be made in your best interests.

Why Set Up a Separate Business LPA?

Many people assume that a personal LPA will cover everything, but it won’t. A personal LPA only applies to personal finances and property, not business dealings.

Without a separate Business LPA, there is no legal authority for anyone to act for the business if you lose capacity. That means:

• Business bank accounts may be frozen.
• Payments to suppliers or employees could be delayed.
• Contracts may fall through.
• Clients might lose confidence.

In the absence of an LPA, an application must be made to the Court of Protection for someone to be appointed as your deputy. This can be a lengthy process, during which your business may struggle to operate.

A Business LPA removes that uncertainty. It ensures that someone you choose, and who understands your company, can step in immediately to protect its interests.

Key Considerations for Business Owners

Creating a Business LPA is not just about filling in a form; it’s a strategic step that requires careful thought and professional guidance.

Align your LPA with existing governance documents

Before you create a Business LPA, check your company’s articles of association, partnership agreement, or shareholder agreements. These documents may already contain provisions for what happens if a director or partner loses capacity. If not, they may need to be amended to avoid conflicts with the LPA.

Choose the right attorneys

Your chosen attorneys should be individuals you trust implicitly, but also people with the experience and judgement to make complex business decisions. This might be a co-director, senior employee, or professional adviser rather than a family member.

Provide clear, specific instructions

An LPA can be tailored to your business. You can outline what decisions your attorneys can make, set limits on their authority, and provide guidance for particular situations. For example:

• Whether they can authorise major spending.
• How they should consult with other directors or shareholders.
• How to handle certain contracts or client relationships.

Taking time to define these instructions prevents confusion and helps ensure your attorneys act exactly as you intend.

Reviewing Governance Documents

Your governance documents are the foundation of your business. Before a Business LPA is put in place, it’s essential to review it for any clauses that may conflict with or override the authority of your attorneys.

For example:

• A partnership agreement might automatically dissolve the partnership if one partner loses capacity.
• Articles of association may require a director to be removed in such circumstances.

Your solicitor can help identify and amend these clauses to make sure your Business LPA and existing legal documents work together. This protects your business from unintended legal consequences later on.

Choosing and Guiding Your Attorneys

Your attorneys will effectively step into your role if you’re unable to act, so it’s important to choose carefully. Consider:

• Their ability to manage financial and legal responsibilities.
• Whether they have relevant business or sector knowledge.
• Their integrity and ability to act in your company’s best interest.

If you appoint more than one attorney, you can decide whether they must act jointly on all decisions or whether each can act independently. Your solicitor can advise on the best approach based on your company’s structure.

Providing specific instructions helps your attorneys understand the boundaries of their authority. For example, you might allow them to manage day-to-day accounts but require shareholder approval for major transactions.

This preparation ensures that, in your absence, business decisions continue to be made responsibly and efficiently.

Business Structures and Their Impact on LPAs

Your business structure determines how your Business LPA operates.

Sole Traders

As a sole trader, your business and personal finances are legally connected. Without a Business LPA, no one else can access your accounts or manage operations. A Business LPA is essential for continuity and protection.

Partnerships

For partnerships, check your partnership agreement for incapacity provisions. If none exist, a Business LPA allows your partners or chosen attorneys to make key decisions to keep the business running.

Limited Companies

Directors of limited companies should review their articles of association. Many companies include automatic termination clauses if a director loses capacity. A Business LPA helps manage the transition and ensures business continuity while complying with company law.

Each structure has unique requirements, so professional advice is vital to make sure your LPA fits your situation.

What Happens If You Don’t Have a Business LPA?

Without a Business LPA, the practical and financial consequences can be serious.

If you lose capacity:

• Your company’s bank accounts could be frozen.
• Regular payments, wages, rent, and suppliers might stop.
• Clients could cancel contracts due to uncertainty.
• Important filings or renewals could be missed.

In this situation, someone would need to apply to the Court of Protection to be appointed as your deputy. The process is time-consuming, expensive, and may result in someone managing your affairs who doesn’t fully understand your business.

Having a Business LPA avoids all this; it keeps your business stable and ensures that the people you trust are in control.

How MJR Solicitors Can Help

At MJR Solicitors, we help business owners across West Sussex and beyond put the right protections in place for their companies.

Our team can:

• Review your business structure and governance documents.
• Draft a bespoke Business LPA that aligns with your company’s legal framework.
• Register your LPA with the Office of the Public Guardian.
• Offer clear advice on selecting suitable attorneys and defining their powers.

We believe legal protection should be straightforward and stress-free. With our help, you can safeguard your livelihood and ensure your business continues to thrive, even if you can’t be at the helm.

Contact us today to discuss setting up a Business LPA and protecting your business for the future.

Frequently Asked Questions