Do I need Lasting Powers of Attorney for my Business?
Posted on 3rd March 2024
In everyday life, the concept of a Lasting Power of Attorney is often associated with personal health and welfare or property and financial affairs. However, what many people do not realise, is that there’s a critical tool that business owners, directors, and shareholders should consider as part of safeguarding their business’s future: the Business Lasting Power of Attorney (BLPA). This blog post from our Lasting Power of Attorney Solicitors in Preston explores what BLPAs are, their importance, and how they serve as an essential component of a comprehensive business continuity plan. For advice on making Business Lasting Powers of Attorney, call our Lasting Power of Attorney Solicitors in Preston on 01772 783314.
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Understanding Business Lasting Powers of Attorney
A Business Lasting Power of Attorney is a legal document that allows a business owner, director, or shareholder to appoint one or more individuals (referred to as “attorneys”) to make decisions on their behalf regarding their business interests, should they become unable to do so due to illness, accident, or absence. It’s specifically designed to cover business decisions and transactions, distinct from personal LPAs that cover personal and financial affairs unrelated to the business. Whilst the form used for making BLPAs and LPAs is the same, our expert Lasting Power of Attorney Solicitors in Preston can advise on limiting your LPA so it only covers your business assets, ensuring there is a clear distinction between your personal assets and your business assets.
Why BLPAs are Critical for Business Continuity
Ensures Uninterrupted Operation
In the absence of a BLPA, if a key individual within the business loses capacity, the company could face operational paralysis. Banks may freeze accounts, contracts could be delayed, and strategic decisions put on hold. A BLPA ensures that there are appointed individuals with the authority to keep the business running smoothly, making critical decisions without delay.
Protects Financial Interests
For directors and shareholders, a BLPA is a means of ensuring that their financial interests are protected. The appointed attorney(s) can manage investments, oversee transactions, and ensure that the business continues to operate in a manner that safeguards the value of the company and its shares.
Legal Compliance and Risk Management
Having a BLPA in place is also about compliance and risk management. It ensures that decisions are made by someone who has a legal and formal authority, reducing the risk of disputes among shareholders, directors, or family members about who should take control. This can be particularly important in closely held businesses or family-owned companies where the lines between personal and business affairs might blur.
Facilitates Smooth Succession Planning
A BLPA can be an integral part of succession planning, ensuring that there’s a clear process for who will take over or make decisions about the business if a key person is unable to do so. It allows for a smoother transition of management and control, which can be crucial for the long-term survival of the business.
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Implementing a Business Lasting Power of Attorney
Implementing a BLPA involves a few key steps:
Choosing the Right Attorney(s):
It’s crucial to select individuals who are not only trustworthy but also have the knowledge, skills, and understanding of the business to make informed decisions. Often, family will not always be the most appropriate attorneys if they have no understanding of how your business works.
Legal Formalities:
Like personal LPAs, a BLPA must be properly drafted, signed, and registered to be effective. The process varies by jurisdiction, so it’s important to consult with Lasting Power of Attorney Solicitors who specialise in business and estate planning.
Communicating with Shareholders:
Once a BLPA is in place, it’s important to communicate this with relevant stakeholders, including banks, business partners, and key employees, so they know who has authority in situations where the LPA needs to be invoked.
A Business Lasting Power of Attorney is a crucial but often overlooked tool in business continuity planning. It not only ensures that your business can operate without interruption but also safeguards your financial interests, complies with legal standards, and facilitates smooth succession planning. As a business owner, director, or shareholder, establishing a BLPA is a proactive step towards securing the future of your business and providing peace of mind in the face of uncertainty.
To discuss Business Lasting Powers of Attorney, contact our Lasting Power of Attorney Solicitors in Preston on 01772 783314 or email wills@mglegal.co.uk.
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