Should You Make a Separate Power of Attorney for Your Business?

A Power of Attorney is a document that enables you to appoint someone to make decisions on your behalf. A Lasting Power of Attorney (LPA) is the most well-known. These are often put in place as a precaution against diseases that could prevent you from reliably being able to make decisions for yourself, such as Alzheimer’s disease or dementia. 

However, this is far from their only purpose. LPAs can also be used if someone is unable to act for themselves for another reason, such as an accident, a mental health crisis, a sudden illness or even because they’re going to be out of the country for a period of time. 

LPAs are usually open ended, but you could choose to make an Ordinary Power of Attorney instead, which is a flexible type of Power of Attorney typically put in place for a specified length of time. For example, you could use an Ordinary Power of Attorney to appoint a representative to manage your affairs on your behalf if you were going travelling and would be unable to sign any necessary documents while you were away. 

How can this help business owners?

Powers of attorney can be very useful documents for business owners. If you own a business, putting a power of attorney in place can be an effective way of future-proofing and preparing for all eventualities. 

You could use an LPA to appoint an attorney who would have the legal right to make decisions about the business on your behalf. If anything unexpected were to happen and you were unable to manage your business yourself (either in the short term or the long term), your chosen attorney would be able to ensure your business was well looked after.

If something like an accident or an incapacitating illness were to happen without any arrangements in place, it’s likely that no one would have authority to make decisions or authorise payments in your absence. If your bank was made aware that this was the case, it would be possible for them to decide to freeze your business’ bank account. 

When a situation like this occurs and there’s no LPA in place, those closest to you would need to make an application to the Court of Protection to ask for a deputy to be appointed on your behalf. Not only can this be a long process, but, by its nature, it would all occur at a time when you’d be unable to have a say on the matter. 

In addition to powers of attorney being hugely beneficial to have in place in terms of long term and disaster planning, you may also wish to utilise them in the short term. As mentioned above, LPAs and ordinary powers of attorney can be really useful tools to allow business owners to delegate legal responsibility whenever they choose. 

Is this true for all business owners?

Making an LPA for your business is likely to be a useful exercise if you operate your business as a sole trader or partnership, or if you’re the director of a small limited company. However, if you’re the director of a larger limited company, the situation might be different. 

Whether or not an LPA would be helpful for disaster planning in these circumstances will likely depend on the company’s Articles of Association, and any provision they’ve already made. If something has been put in place for if the director is unable to act due to accident or illness, you may well find that making an LPA is not necessary. 

However, even if this is the case, an LPA may still be helpful in order to enable you to delegate your shareholders vote to a named attorney. (Assuming the Articles of Association allow this.)

Do you need to make a separate power of attorney?

If you wish to use a Power of Attorney to delegate business decisions in certain circumstances, it’s important to ensure that it’s been specially drafted. An experienced private client law solicitor will be able to help you do this. They’ll also be able to advise on whether or not you need to make separate powers of attorney to deal with your personal and business interests.

In some cases, this might not be necessary. If you’re a sole trader or a partnership and there’s little separation between your personal and business affairs, it might make sense to keep things simple. 

However, there are many reasons why you may wish to consider making multiple powers of attorney. These include:

  • Whether you’d wish to appoint the same attorney(s) to act on behalf of your personal and business interests.
  • Whether appointing the same attorney for your business and personal affairs (or indeed for multiple businesses) could create a conflict of interests.
  • Whether trying to cover your personal and business interests in a single Power of Attorney would be too confusing. 

If a power of attorney is too confusing, or if it clearly creates a conflict of interests, it runs the risk of being rejected by the Office of the Public Guardian at the registration stage. 

Whether you choose to make a separate Power of Attorney for your business or to incorporate these interests into your personal Power of Attorney, it’s important to ensure you’re working with a solicitor who is able to make these wishes clear. If you do make separate documents, your solicitor will need to ensure each one is carefully drafted to set out the scope of each one, and how it differs to the other. 

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