A Lasting Power of Attorney (LPA) is a legal document that enables a person to appoint one or more people (Attorney(s)) to deal with your Property and Financial Affairs and/or Health and Welfare decisions on their behalf.
People commonly make Lasting Powers of Attorney in relation to their private lives, often appointing spouses, adult children, other close relatives or friends as their Attorneys. This helps to guard against difficulties that may arise in dealing with their personal affairs as result of a temporary or permanent loss of mental capacity.
So far, so good, you may think.
However, what if you own, or are involved in the running of, a business? What would happen if you lost capacity? Is the attorney, who may be very capable and trustworthy in relation to your personal affairs, also appropriate for dealing with your business interests? Does the Lasting Power of Attorney give the attorney the appropriate authority to deal with the business?
A different skill set is required to properly handle business commitments such as contractual obligations and issues concerning health and safety, insurance, tax and employment. Also, it is important to note that if you work in a regulated sector where formal authorisation is required, such as financial services, veterinary or law, your attorney will be prevented from carrying out their duties.
Clearly, you must choose the right person for the job.
The Mental Capacity Act Code of Practice is a good starting point when considering who to appoint. It states that an attorney should be trustworthy, competent and reliable, and should have the necessary skills and abilities to carry out the tasks required of them on your behalf.
If you are a company director, you should also consider the requirements set out in the Companies Act 2006. Broadly speaking, these include the duty to act in good faith and to exercise independent judgement and reasonable care, skill and diligence in the execution of your duties.
Your attorney may well find themselves out of their depth if asked to take over your role as a director, which could have a negative impact on the business or cause friction with fellow directors that harm the business as a whole.
In addition, the Mental Health (Discrimination) Act 2013 removes the ability to terminate a director’s appointment on mental health grounds, and so there is clearly the potential for serious difficulties to arise in the continued operation of the business without an appropriate attorney in place.
How we can help
When drafting the Lasting Power of Attorney, careful consideration has to be given as to what instructions are included and what authority is given to the Attorney’s. The Lasting Power of Attorney also has to read alongside any company documents whether that is a partnership agreement or the company’s articles.
Should you need expert legal advice regarding any matters relating to Business LPA’s please contact Francesca Rigby our Head of Private Client and Court of Protection Team on 0161 694 4172 or email email@example.com.