Business Lasting Power of Attorney

Why a BLPA is a wise business move

We encourage all our business clients to put in place a Business Lasting Power of Attorney (BLPA). This is because a BLPA may help the business survive, particularly through any difficult times. The Covid-19 pandemic  highlighted this issue all too dramatically as business owners have to consider the question: ‘What do I do if I am unable to run my business due to illness?’

A BLPA can be used for four different groups of business owners:

• Sole traders
• Partners
• Members of a Limited Liability Partnership
• Directors

Without a BLPA in place, if the business owner loses capacity for any reason, then the bank could freeze any business accounts, resulting in invoices remaining unpaid and contracts being unfulfilled. Rent cannot be paid and nor can staff.

If a business owner does not have a BLPA in place and loses capacity, it would mean that an application would have to be made to the Court of Protection to appoint a deputy. This could take at least six to twelve months (even on an emergency application) and most businesses cannot survive such a wait. Unfortunately, we have direct experience of businesses failing because a client failed to put in place a BLPA.

A BPLA is the only way for an owner to choose who will deal with their business affairs if they are unable to do so. We have found that business owners may well have a Powers of Attorney to deal with their personal property and finance, but have not considered if this person is the right person to run their business affairs. This person needs to have the skills, experience and knowledge to keep the business going if the owner is unable to make day-to-day decisions, so it’s essential this is thought through and planned for.

What is a Business Lasting Power of Attorney (BLPA)?

A BLPA enables the business owner, known as the ‘donor’, to authorise an Attorney to make decisions concerning their business interests when they are unavailable or lack capacity. The making of a BLPA does not stop the business owner continuing to make their own decisions.

If someone has not made a BLPA then the Mental Capacity Act 2005 provides that the Court of Protection can appoint someone to make decisions regarding the carrying on of any profession, trade or business on behalf of P (‘the patient’). This is a lengthy and expensive process and the person appointed might not be the person the business owner would choose.

How do you use a BLPA?

A BLPA can make decisions about the running of the business. These will include, for example:

• Business contracts
• Sale or acquisition of business
• Paying wages, tax or VAT
• Hiring or removing of employees
• Controlling and managing business assets
• Managing business health and safety
• Marketing
• Litigation
• Discharging debts
• Winding-up a business

It is important that a distinction is made between running a business and working within a business. A BLPA can only make decisions relating to running the business.

Whilst the main benefit of putting in place a BLPA is to cover the situation if the donor loses capacity, it can be used prior to the donor losing mental capacity, eg. because of physical infirmity.

Taking instructions

When we are instructed to establish a BLPA we do the following:

• Identify who is the donor and why they want to make a BLPA
• Conduct a business evaluation (as far as possible)
• Establish that the donor has mental capacity
• Establish that the Attorney is a suitable person
• Consider whether a ‘Memorandum of Wishes’ is required to explain on an informal basis how the BLPA should be used

Before meeting with a client to draw up a BLPA we ask them to consider a number of questions including:

• How many businesses do they have?
• If there are other business owners, who are they; how did they come together; and how do they work together?
• Who they might choose as their business Attorney – is it someone inside or outside the business and are there any potential conflicts of interest now or in the future?
• How do they see their business developing; what is the business plan?

Establishing the answers to the above questions is an important part of establishing that the donor has the capacity to sign a BLPA. We will also need to consider the terms of any partnership agreement or company articles to ensure that delegation is allowed. If not, amendments may need to be made.

We will also seek to establish whether there are any existing Powers of Attorney in place to ensure there are no conflicts with these, as it is possible to have more than one Lasting Power of Attorney (LPA), such as a Health and Welfare LPA or a Property and Finance LPA

Choosing an Attorney

The choice of Attorney for a BLPA is obviously crucial.

The Attorney should ideally understand the donor’s business practice or work in a related field. They need to understand the donor’s contractual obligations and any health and safety issues and business risks, including business insurance.

An Attorney does not have to have expert knowledge in all these areas but they should at least be astute enough to know when to seek advice.

The Attorney needs to understand how and why the donor makes their business decisions and be able to perform their role at the required standard within that business.

It is advisable that they possess similar skills to the donor and understand the donor’s role in the business and that they have a duty to act reasonably in applying business skills.

There may be regulatory measures to consider; eg. the Attorney may need appropriate qualifications to run a business. Ideally the Attorney should possess the necessary skills to run the business.

There is a risk that they may be liable if they do not have these skills as the Rules of Agency apply and so the principal (the donor) can be responsible for their agent’s actions. An inappropriate Attorney may find other partners in a business bringing a claim against the principal and also against the Attorney as the principal’s agent.

Many clients choose Attorneys from within the business but in such a situation it has to be clear that there is no conflict of interest.

The donor(s) may want to appoint their accountant or solicitor as Attorney or someone with similar business experience. In such situations we advise that the donor should discuss who they are appointing as their Attorneys with their fellow partners or directors; and that may also encourage their fellow directors to put in place their own arrangements.

Our expertise in Powers of Attorney

At LCF Law we have a highly experienced team that has decades of experience of advising and applying for BLPAs, LPAs, EPAs and drafting General Powers of Attorney; as well as acting as professional Attorneys for an extensive range of clients in many different situations.

As well as having extensive experience and knowledge, we are also great listeners and work hard to really understand your circumstances and provide the most appropriate advice and support in order to give you complete peace of mind.

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