We take out car insurance, home insurance and critical illness policies, all to cover events we hope will not happen, but which we would like to have covered “just in case”. Lasting Powers of Attorney (LPAs) are another form of protection you hope you won’t need but would be good to have in place if you lost mental capacity, which can happen suddenly through illness or accident.
It is important for everyone, whatever your circumstances, to consider who should make decisions relating to your health and welfare, and/or property and financial affairs, if you lost the capacity to do this yourself: LPAs are how you appoint your chosen family member(s), trusted friend(s) or (in the case of property and financial affairs) professional to act for you in these circumstances. Appropriately drafted and registered Property and Financial Affairs LPAs can be also used while you still have capacity so your attorney could act, for example, if you were travelling abroad while a decision or signature was required. This could be particularly important given the global nature of many businesses.
For business owners specifically, whether they are partners, sole traders or company directors, unexpected incapacity (even if only temporary) can impact significantly on the business’ finances – perhaps third parties could not be paid, stock could not be purchased and no one would be authorised to control the business account. You might think you could rely on family or employees to deal with the running of the business but they may not have the authority to do this.
It is critical to choose as your attorney someone who is familiar with the business so it may be appropriate to appoint separate attorneys, one to deal with the running of the business and one to deal with personal matters; you could even put separate LPAs in place. Company directors should also review the company’s documents as the steps to be taken in the event of their incapacity are usually governed by the company’s articles of association, so the LPA alone may not be sufficient.
Care must be taken when drafting an LPA to appoint different attorneys to deal with specific tasks, a matter we have extensive experience in dealing with.
If you were to become incapacitated then, without an LPA, an application would need to be made to the Court of Protection in order for someone to be appointed as your deputy. The person appointed may not have been the person you would have chosen and this process also takes some time with a financial burden far higher than the cost of putting an LPA in place. In the meantime, the business may suffer. LPAs should, therefore, be regarded as another insurance policy vital to the ongoing success of your business.