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Lasting Powers of Attorney should be the cornerstone of an effective business continuity plan for companies of all sizes, says Devorah Ormonde of local solicitors Wiseman Lee.

Prudent business owners may have had the foresight to purchase Key Person Insurance, but this will not assist with the practicalities of running the business if that key person is ill or injured and unable to work or make decisions. For that reason, Lasting Powers of Attorney (LPAs) are frequently being used by business owners to protect their business interests in the event they or their key colleagues become incapacitated.

For business owners who travel as part of their business, having a business LPA for property and financial affairs that can be used while the donor has mental capacity makes sense to ensure the continuity of the business during their absence. Once registered with the Office of the Public Guardian, it will allow an attorney to make financial decisions and sign documentation on the donor's behalf, and the authority would also continue if the donor subsequently loses mental capacity. The attorney's powers can be limited depending on the needs of the business but could include buying and selling property, organising property insurance and repairs, accessing bank statements, opening and closing bank accounts, investing assets and dealing with tax affairs. If the attorney is another person working in the business rather than a family member, it may be desirable to restrict the powers so the attorney is not able to manage the donor's personal property and financial matters. A separate LPA may be made to deal with personal affairs.

The first step in preparing a business LPA is to assess the structure of the business. For sole traders, the owner can execute an LPA to appoint any attorney to act on their behalf.

Using LPAs in partnerships depends on whether there is a partnership agreement that allows for an attorney to take decisions on behalf of a partner. Where no such agreement exists, in the event that one of the partners becomes mentally incapable, an application to court may be needed to remove the partner on the basis that the person is incapable of adhering to the partnership terms.

For companies, it is necessary to review the articles of association as directors cannot delegate their functions as a director unless the articles specifically provide for this. In many cases, the director will also own shares in the company. Therefore, a solution may be for the owner of the shares to have an LPA to ensure business continuity by the attorneys, who can appoint a new director in the event of the donor's incapacity.

Before an attorney accepts their role, it is important they fully understand their responsibilities, and they may need to take out their own personal liability insurance to ensure they are protected whilst acting on a donor's behalf. As ever, there is no substitute for good advice. If you are thinking of setting up an LPA or have been asked to become an attorney, ensure you speak to a solicitor.

Wiseman Lee is located at 9–13 Cambridge Park, Wanstead – call 020 8215 1000

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