We’ve all heard about Powers of Attorney and many people associate these with elderly people suffering an incapacity, such as dementia. Mental incapacity can strike at any time, temporarily or permanently, through Illness or an accident. What would happen to your business? Who would carry on your duties and maintain an income for yourself and your family if you couldn’t?
There is no automatic right for your next of kin to take over your decision making. Informal agreements can break down and are often not recognised by financial or business institutions. Leaving it to chance can mean that financial obligations are not met; delays occur; business relationships breakdown; wages are not paid and you are no longer able to support your family.
Plan ahead: make a Business Lasting Power of Attorney, legally appointing someone you trust and someone who has the necessary skills to make business decisions for you. Starting this process begins with a conversation, a conversation with your business partners and your family about who is best suited to step-in.
If you are a sole trader, a Business Lasting Power of Attorney is an effective way to make provision for business continuity in the event of accident or illness.
A partner in a partnership business could make provision within a partnership agreement. If you don’t have one, there is no provision within the Partnership Act dealing with incapacity and therefore you and your fellow partners could find yourselves in difficulties. It is common for business partners to appoint each other under a Business Power of Attorney or perhaps a business partner and close family member to be appointed jointly. If you are a Company Director your Articles of Association may make provision - these should be checked before making any Business Power of Attorney. The model articles for private companies limited by shares (Companies Model Articles Regulations 2008) state “a person ceases to be a Director as soon as a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a Director and may remain so for more than three months”. This may meet your requirements but if not you should consider both amending your Articles of Association and making a Lasting Power of Attorney that does suit your needs. If you are the sole director it may not be appropriate to amend these Articles and a Business Lasting Power of Attorney would enable someone of your choice that you trust to continue the day to day running of the company. Powers of Attorney are bespoke documents: you choose; you set restrictions and conditions; you provide guidance and you stay in control by making provision for the future.