Protecting the family firm with a financial Lasting Power of Attorney

When it comes to a family business, taking steps to protect its future by appointing a financial Lasting Power of Attorney can be a vital safeguard.

Without one, the effects on a business can be catastrophic if a key director or shareholder suddenly becomes mentally incapacitated through an accident or illness.

It could mean the total paralysis of the day to day running of the business as the slow and costly process of applying to the Court of Protection to appoint a deputy to manage the affected person's affairs takes place.

What is a financial LPA?

Lasting Powers of Attorney are divided into two categories - health and care decisions and financial decisions.

Financial LPAs enable people to delegate decision making regarding their property and financial affairs, including the power to act as a director and rights as a shareholder in any business.

Some business owners choose to make one LPA for their personal finances and another for any business interests, appointing separate attorneys for each.

A business LPA is a type of financial LPA that deals specifically with an individual's interests in a particular business separately from general financial decisions.

Once registered, it can be used as soon as the person who has made it, known as the donor, gives permission.

Business LPAs - specialist advice

A business LPA is not an 'off the shelf' document. It relates specifically to an individual's role in a specific business.

Choosing the right attorneys is key. Often this will be another director or partner in the business, although sometimes an independent person like a solicitor or accountant will be better placed to protect the donor's interests.

Specialist legal advice is highly advisable. Drafting a business LPA can be a complicated procedure and requires not only an understanding of private client law but also company, commercial and employment law.

Important points to remember about a business LPA include:

• It should be reviewed regularly to make sure it is up to date and relevant to the donor's and business' needs;
• It can be used as soon as it is registered once authorised by the donor;
• It doesn't have to be a permanent arrangement - business LPAs can be used if a donor loses capacity temporarily.

For more information about setting up a Financial Affairs LPA or a business LPA please contact Wards Solicitors specialist Wills, Probate and Mental Capacity team.