LPAs for Business Owners

LPAs for Business Owners – Against a backdrop of antidiscrimination legislation and shifting demographics the use of separate ‘personal’ and ‘professional’ LPAs for Business Owners grows increasingly common.

 

  • Legislation acknowledges the need for separate Business LPAs
  • Distinct Business LPAs allow Attorneys to put the interests of a Company first
  • Removal of a mentally impaired director may take an impractically long time

 

Personal Lasting Powers of Attorney (LPAs) are typically used by a ‘Donor’ to appoint trusted third parties to make critical finance and welfare decisions, on their part, if they are unable to (owing to loss of capacity for instance) or (in the case of financial matters) choose not to.

 

It is now acknowledged in law that there are “Cases where the donor should have made two LPAs: one for their business affairs and the other for their personal finances” (Senior Judge Lush).

 

A Business LPA bears both differences and similarities to personal documents. A key tenet of the Mental Capacity Act 2005 is that Attorneys must act only in the best interests of the Donor. Companies, however, have their own distinct legal personalities. Whilst an Attorney appointed under a Business LPA still acts for the Donor as an individual, legislation recognises that decisions made by e.g. company directors, must be made in the interest of the entity, even when these are contrary to those of the individual.

 

It’s important to differentiate a Business LPA from a Business Power of Attorney, the latter are made frequently but do not persist in situations where a party loses mental capacity, as do Business LPAs.

 

LPAs for Business Owners

The importance of Business LPAs is highlighted when one considers a situation in which the Director of a company loses mental capacity. The director in question cannot be removed from the company simply for mental health problems, as legislation prevents this on the basis of its being discriminatory. Further, any company action e.g. a shareholder vote, to remove such a director cannot be implemented, since notice cannot legally be served on one without capacity. In the absence of a Business LPA, the only way to manage such a situation is to pursue a deputyship through the courts which may take many months.

 

A critical (and challenging) component of putting a Business LPA in place is selection of suitable Attorneys. The powers conferred on such individuals are significant as are the challenges they face. At the broadest level, Attorneys must have knowledge of their fiduciary obligations. They must also potentially have matched technical expertise/qualification with the Donor e.g. Attorneys for accountants and solicitors must be so qualified; performance of regulated financial services demands authorisation on the part of the Attorney.

 

The pool for candidates may prove shallow. Selection from competitors raises questions over the management of conflicts of interest and commercially sensitive information. Conflicts may even arise when considering those within the same company, particularly where the duties of a director must be resolved with an interest in ownership, as in the case of director shareholders.

Business LPAs are critical documents which must be created and managed with great care. If you are considering creating these, we strongly recommend speaking to a professional. Visit us at www.confidencewills.co.uk to book a free consultation without obligation. Nothing in this article should be considered financial or legal advice.