Do I need a Business Lasting Power of Attorney?

What is a BLPA?

A lasting power of attorney (‘LPA’) is a legal document that enables you to choose someone you trust to act as your attorney to make decisions on your behalf.

There are two types of LPA:

• one for property and financial affairs which enable your attorneys to manage your finances and property (‘FLPA’); and
• one for health and welfare which enable your attorneys to make decisions about healthcare and personal welfare.

A BLPA is a type of FLPA limited to your business interests, giving your attorney the authority to look after your business in the way that you would expect.

What does a BLPA do?

It appoints a suitable attorney to make decisions about your business interests when you cannot make them yourself, either because you are unavailable e.g. on holiday, or because you have lost capacity.

The creation of a BLPA separates your personal finances from your business interests.  Attorneys appointed under a BLPA can only make decisions concerning the business and this restriction is set out in the document.  A similar restriction should be in your personal FLPA, that it only covers your personal finances.

BLPAs are more complicated than personal FLPAs and the extent of the attorney’s authority should be carefully considered.

Do I need a BLPA if I already have a general power of attorney or personal FLPA?

A general power of attorney is revoked if you no longer have mental capacity.  A BLPA or FLPA is valid whilst you have capacity and continues to be valid if you lose capacity.  It must be registered with the Office of the Public Guardian before it can take effect which can currently take 20 weeks or more.

If you want to have different attorneys dealing with your business from your personal finances, you will need a finance LPA for each.  The BLPA may have different instructions or preferences for your attorneys to follow.  You may want your BLPA to be effective immediately after registration but your personal FLPA to only be effective if you have lost capacity.  The BLPA should be specific to your business and if you have more than one business, it is advisable to have one for each business.

Conflicts of law

The BLPA must comply with the applicable law relevant to the business type; eg Partnership Act 1890, Limited Liability Partnership Act 2000, Companies Act 2006 and should not conflict with the business’ governing documents.  These documents should be reviewed when a BLPA is made.

What should you consider when choosing an attorney?

Whilst it is tempting to choose your spouse or other family member it is worth taking the time to consider the following:

• Do they have the ability and experience to fulfil their role?
• Do they understand your business?
• If your business is regulated, are they similarly regulated?
• Will their appointment come into conflict with other partners, directors or shareholders? This may be because they don’t get along or because, for example, what is best for the family may not always coincide with what is best for the business.
• How old are they and are they in good health?

What happens if you don’t have a BLPA and lose capacity?

A deputy application can be made to appoint someone, a deputy, to act on your behalf.  This is a costly application and can take 6 months or more to be granted.  The person seeking to be appointed as your deputy may not be someone you would have chosen as your attorney.  During this time, no-one can legally make decisions on your behalf.  The impact on your business will vary depending on the nature of the business but it may not be possible to access bank accounts to pay staff and suppliers, contracts may be jeopardised or even lost, loans may remain unpaid resulting in financial penalties, insurance policies may expire exposing you to personal liability and the reputation of the business may suffer as a result of these issues.

How can Greenwoods help?

Contact our Wealth Preservation team, who will work collaboratively with our Corporate team to review your governing documents and ask the right questions to ensure that you have the correct powers of attorney in your succession planning toolkit.  We can provide peace of mind that both your personal and business affairs will continue to run seamlessly if you lose capacity.