As a business owner or director, you wear many hats and separating work-life from home-life can be an important part of switching off. However, have you ever considered what would happen to your business if you became incapable of making important day to day decisions? And how this might impact upon your family?
Ensuring business continuity is a vital part of any business, and such issues are usually addressed in the boardroom as part of the general approach to risk management. But such risks are often neglected when an entrepreneur goes home.
While fewer than half of all adults in the UK have a will, an even smaller percentage of people have a lasting power of attorney in place. This means that your finances and health could be at risk in the event of an accident, a serious debilitating illness, or a decline in mental health.
Mary Shaw, private client solicitor at Warners in Tonbridge, advises all business owners and entrepreneurs to create a lasting power of attorney “drawing up a lasting power of attorney should be as much a part of your risk management approach as taking out key-man insurance” comments Mary Shaw.
If your business is run as a partnership or has a board of directors, it is prudent to ensure that all members have lasting powers of attorney to cover what happens to their company voting rights, shares and drawings.
If you become unable to manage your own decisions even your close family does not have an automatic authority with company employees, your contacts or your company bank.
Creating a lasting power of attorney is relatively straightforward. You simply need to appoint someone you trust to look after your financial affairs and property matters. They will then be able to make decisions on your behalf and act on your authority with financial institutions.
The power of attorney only comes into effect if you should become incapacitated. Your attorney must always act in your best interests and follow a strict code of conduct which includes taking account of any views you have expressed in the past.
Your lasting power of attorney can cover both your business and personal finances or you can make two separate ones. For example, you may want to appoint your second-in-command at work to act alongside a trusted family member. Alternatively you might appoint an independent professional.
The key things to consider will be who you trust to look after things until, hopefully, you recover from any illness and return to work.
Without a lasting power of attorney, it would fall on your family to apply to court asking for someone to be appointed as your deputy. This process can take a long time and is very costly. Your employees cannot be left to run your business in your absence indefinitely; they will not have authority to do so from Companies House.
Once you have made a lasting power of attorney, it can be revoked at any time, which may be necessary if you retire or sell your business. It is up to you to decide the circumstances of when the power of attorney should be used.
People often think powers of attorney are only necessary for the elderly but they can be beneficial in a wide range of circumstances. For example, stress at work can also lead to mental health issues. Anyone who regularly travels to dangerous locations on business face a variety of risks. Financial success can lead to an increased participation in adventure sports, where part of the thrill may be a chance of serious injury.
It makes good business sense to set up a lasting power of attorney, and this should be a regular part of any business risk management strategy.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.