Businesses at risk without a lasting power of attorney

A Business Lasting Power of Attorney (LPA) is a protective legal document that allows the subject to nominate pre-approved individuals to undertake professional decisions on their behalf if incapacitated.

Considered on par with business insurance for many companies, researching and enacting the right LPA can help provide a level of personal and professional care that helps protect against raised risk in the current marketplace.

These chosen attorneys are vetted and reviewed in advance to ensure they possess skills, experience and necessary drive to fulfil their temporary roles. The process can also nominate replacements and put in place specific contingencies to deal with job-specific challenges.

If triggered, the document allows the earmarked individuals to carry out the subject’s key managerial or professional functions. This can help maintain continuity until the recovery period is over or allow for a controlled wind-down of the position and facilitate an exit.

This helps protect the company, the friends and family of the affected individual, and the eco-system of suppliers and clients around the business in moments of crisis.

Why do I need one now?

While many companies may choose to continue without securing Business LPAs for key members of staff, the risks involved are potentially higher than ever before. Chief among these is the real and present threat posed by COVID 19 and the disruption that follows infection.

If contracted, the disease has a protracted – often asymptomatic – gestation period that can be accompanied by a swift decline. Recovery involves isolation and extreme cases can result in hospitalisation and a range of invasive procedures that take a toll on physical health. No matter the severity of the case, recovery can be protracted and result in a prolonged leave of absence or diminished capacity to make demanding daily business decisions.

This makes it vital to ensure that your key members of staff are protected and that delay and disruption to your business and its cashflow are kept to a minimum.

What are the risks?

Securing an LPA is a pre-emptive action that protects an individual and their business from the negative effects of incapacitation. While these may vary from company to company, some key risks include:

• Business lockdown: When a central member of staff is incapacitated, the business will legally lose access to functions and processes that rely on their consent. And if the individual is a sole trader or has a high degree of centralised control, this can potentially be catastrophic. This can lead to bank accounts being frozen, significant delays on scheduled payments, and key business and payroll actions being stalled.
• Delays: If a key decision maker is incapacitated, essential strategic and professional decisions cannot move forward. This includes contract management, strategic decisions, or being able to respond to opportunities and threats in the marketplace. This loss of momentum can be difficult to recover from and runs the risk of losing your competitive edge.
• Unnecessary expense: If an individual is incapacitated, the only option left available is taking out an emergency order or expediting the creation of a deputy role. This is costly, time consuming, and often highly stressful for the individuals enacting the task. While courts can also work to grant emergency orders, this can prove to be expensive and does not carry a guarantee of success.

How do I acquire one?

Thankfully, a business LPA is quick and simple to secure. Working with a reliable provider will allow you to appoint up to four distinct attorneys to cover their interests and set the parameters for the document.
Drafting a business LPA is not rote process and involves extensive planning and preparation to ensure it is fit for purpose. Finding a seasoned legal professional will help supplement your understanding and remove any loopholes and address key issues for the business. This should ideally be supplemented by a series of legally binding instructions to define management actions and areas of focus.

The agreement should be also drafted with an eye to company law to help ensure that – when the chips are down – the most sensitive elements of your business are catered for. Once complete, the document is registered with the Office of the Public Guardian, with the process taking between eight to ten weeks from the point of filing.

Sarah Nash is an associate director and the head of Ansons’ Wills, Probate and Trusts team. She is a full member of STEP, with more than 19 years’ experience advising on a wide range of private client matters including, Lasting Powers of Attorney and Deputyship. Sarah has presented seminars, written blogs and undertaken radio interviews on the topics of wills, probate and trusts.