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Lasting Powers of Attorney for business

View profile for Ceri Philpott
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Do business owners need a Lasting Power of Attorney?

We may all have heard of the benefits of making Lasting Powers of Attorney (LPA) for ourselves and our loved ones.  However, it is also vitally important that business owners consider the consequences of failing to make a Business LPA. It should be an essential part of the financial planning and strategy of any business that thought is given to the preparation of a business lasting power of attorney to avoid the potentially catastrophic consequences arising from the mental incapacity of a business owner. 

What happens if there is no Lasting Power of Attorney in place?

Consider a sole trader, a business partner or company director – if loss of mental capacity occurs – then the business bank accounts will be frozen, and any contracts entered into may encounter enforceability issues.   Without a Lasting Power of Attorney in place, an application for a Deputyship Order to the Court of Protection would have to be made, a lengthy and expensive process which, again, can cause delays that can be disastrous for your business.

What are the benefits of making a Business Lasting Power of Attorney?

Many Lasting Powers of Attorney for Business can be used to formally retire the incapacitated business owner (donor of the LPA) because this will be in the best interests of the business.  If the business owner lacks capacity, they may not be able to give a valid receipt for the sale of their interest in the business, but an attorney can do so on their behalf.  The payment of creditors, employees or tax becomes difficult if not impossible as does the general running of the business where the business owner no longer has capacity and investors may require their investments to be returned.  For regulated professions such as solicitors or accountants, lack of capacity may have professional implications for business owners, such as the intervention of their regulatory body.  The appointment of an attorney ensures the continuity and smooth running of the business.

Should you take advice before preparing a Partnership Lasting Power of Attorney

For Partnerships, you should ensure that any partnership agreement includes provision for an incapacitated partner.  If it does not and you wish to prepare a business LPA, you should consider taking specialist advice to ensure that there is no conflict between the provisions of the partnership agreement and the business LPA.

Can you terminate a director’s appointment in the event of incapacity?

There may be provision in a company’s articles of association for the termination of a director’s appointment in the event of incapacity, but such provision may now become unlawful. The Mental Health (Discrimination) Act 2013 may be introduced by parliament to contribute to removing the stigma associated with mental illness and it is planned to revoke provisions contained in the Companies (Model Articles) Regulations 2008 and related regulations which provide for the termination of a company director’s appointment by reason of that person’s mental health.


At hpjv solicitors we have specialist advisors who can guide you through this extremely important topic and help you plan your business and protect it in the future.   Please do not hesitate to call us on 01633 242526, or email Susanne Hamilton if you require further advice