Power of attorney
Business Continuity and Lasting Power of Attorney
As a business owner, you invest significant time, money, and effort into building and maintaining your company. A robust business continuity plan is essential to protect that investment and ensure the business can continue operating if disaster strikes.
A key part of this plan is putting a Lasting Power of Attorney (LPA) in place for your business. This ensures that trusted individuals have the legal authority to make decisions if you — or a co-director or business partner — are unable to do so due to accident or illness. Without an LPA, a deputyship order would be required, a process that can be expensive, slow, and complex.
During that time, the day-to-day running of the business may be severely disrupted, potentially threatening its survival and the livelihoods that depend on it. Incapacity can arise in many ways and may be temporary or permanent. Strokes, head injuries, and dementia can affect people of working age and often result in long-term disability.
If incapacity occurs, banks may freeze business accounts, and key decisions may be impossible to authorise without court intervention. For companies and partnerships, where joint director or partner approval is required for contracts, payments, or loans, the absence of an LPA can create operational paralysis. It is therefore vital that each director or partner has an LPA in place.
Importantly, removing a director on mental health grounds is not a safe alternative; equality and mental health legislation protects individuals from discrimination, and attempting removal could expose the business to legal claims.
What Happens After The Unexpected?
Planning for what happens to your business after your death is just as important as planning for incapacity. For many owners, the business is one of their most valuable assets and a primary source of financial security for their families and employees.
The outcome depends on your business structure. For sole traders, the business is not legally separate from the individual, so assets pass according to your will or, if you do not have one, the rules of intestacy. Specific business assets can be gifted to named beneficiaries if you wish.
In a partnership, the absence of a formal partnership agreement usually means the partnership automatically dissolves on death. A properly drafted agreement provides clarity about how shares are handled and valued, protecting both the surviving partners and the deceased partner’s estate.
In a limited company or limited liability partnership, the business continues to exist as a separate legal entity. Shares typically pass in accordance with the articles of association or your will and may be left directly to beneficiaries or placed into trust. Clear estate planning ensures continuity, minimises disputes, and safeguards the future of the business and those who depend on it.