You may think of special powers of attorney as something that could be relevant to your life outside of work.
For example, if you became unable to manage the household finances or make decisions about your care arrangements.
However, business owners are also urged to set up an arrangement known as a Financial Lasting Power of Attorney (LPA). That way, should you become unable to run your company due to accident or illness, then control of your company can be passed swiftly to the trusted person you have nominated as your attorney. If you don’t put an arrangement of this type in place, then what would happen to your company if there was no one to run it? Without a Financial LPA, it may be the case that an application would have to be made to the Court of Protection for someone to act as your deputy, and this could take several months.
Some of the issues that may arise if you were incapacitated and there was no Financial LPA in place include:
- Your company articles of association may specify a minimum number of directors who are required to make decisions. Without you, there may not be enough directors to meet this minimum requirement.
- If you are unavailable to sign cheques and authorise payments, creditors could start taking action against your company to recover unpaid bills.
- A mortgage or loan provider may use your incapacity as grounds to call in the debt.
- If your company goes into liquidation as a result of your accident or illness, lenders may seek to recover any assets used to guarantee a business loan, which might include your home.
You can appoint just one person as your attorney, or you can appoint more than one person if you wish. In the latter set of circumstances, you choose whether the attorneys act jointly (they must always reach agreement before taking action) or jointly and severally (if one attorney is unable to act for any reason, then the other has the power to make decisions themselves).
If you don’t have a Financial LPA in place for your company, then you are strongly advised to seek legal advice as to whether this type of arrangement would be suitable.
Any Financial LPA that is agreed must be registered with the Office of the Public Guardian.