LPAs for Business


Many of us are familiar what a lasting power of attorney is. It is essentially a way of choosing who you would trust to make decisions concerning your personal finances and your health and welfare should you lose the capacity to make those decisions yourself. Many of us choose to make an LPA late in life when we have a more realistic understanding of our own immortality.

Many of us, however, may be surprised to hear that a LPA cannot just deal with our personal day-to-day requirements but also our business interests as well. It is possible for a LPA to be created to protect the business interests we have.  These types of LPAs are sometimes called commercial LPAs. These might include business interests in a partnership, when we run our own business, or indeed if we hold more structured business interests in perhaps a limited company.

Changes in the law brought about by the Equalities Act 2010 now make it unlawful to remove a director/partner from their role on the ground that they have lost capacity. This can pose some very serious concerns for business owners.

It is not uncommon for a particular Partner or Director/Shareholder to assume a number of important roles to the exclusion of others within a company such as writing all the cheques or managing a large investment on their own. That person does not have to suffer a serious accident to incapacitate themselves, a missed plane or other travel difficulties could prevent them from being capable of doing a task on behalf of the company or partnership that could lead to serious disruption or financial loss to the firm.

There are many challenges to the smooth running of any business. More concerning might include dealing with a debilitating illness such as depression. One adult in six has a common mental disorder.  Over all rates of common mental disorders in England steadily increased in both men and women there are perhaps many causes of mental illness aggravated by the increasing pace of modern life.  What is hard to deny is that current trends in mental illness are unlikely to change in the near future.

Many of us who have business interests rely significantly on them for our income. Others who work with us rely just as heavily on the businesses’ health and survival.  When you consider the loss of a key individual to a business the consequence of mental illness on business is substantial.

The challenge to your business is not just alleviated by the creation of an LPA for your business interests. There are other challenges that lie in wait for those who choose not to instruct a competent solicitor to draft the lasting power of attorney in the first place.

Choosing your attorney wisely

When considering the right person to appoint it is worth remembering what you will be asking that attorney to do should you lose capacity and not be able to look after your business interests yourself. That task is likely to call for specialised skills.  Certainly if you wish your attorney to manage your business interests with others then your attorney will also need to command the respect of those that he or she will be working with. If your business is in a particular specialised industry or sector there may be restrictions on who can manage your business affairs.

Setting up a Commercial LPA

The LPA will need to compliment and work with a number of interlocking documents such as your articles of association or your partnership agreement. You may have multiple business interests.  It does require some considerable thought to ensure that the LPA can do what you want it to do.

The possible pitfalls of commercial LPAs

Perhaps the most obvious possible difficulty would be if the commercial LPA has not been drafted properly. If that were the case and as a consequence your business suffered financial loss then a claim may be brought against those who drafted the LPA for you.  This highlights the importance of instructing competent solicitors in the first place, who you are in effect entrusting the health and future of your company to.

The person you appoint as your attorney not only needs to have the requisite skills to carry out the task of protecting your business interest but also will need to be able to work with your other shareholders, directors or partners in your business.  A dispute could arise as a consequence of the breakdown of that relationship.  Discussing any potential attorneys with the people you are in business with may well mitigate against that possibility.

There is always the possibility that any appointed attorney could abuse their position. Perhaps this is more likely in smaller owner run businesses where the attorney is given almost exclusive control of the company.  Should that attorney abuse his position and either commit fraud or other offences then their fraudulent acts may lay undiscovered until you regain capacity or one of the people you were in business with takes action against that attorney.  This can lead to all kinds of difficulties and puts your business in significant harm.  There are steps that you can take to limit the possibility of such a disastrous outcome.  Certainly choosing wisely when it comes to appointing your attorney should not be overlooked.

Alastair Goggins

Head of Dispute Resolution Team
Head of Charity Team

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