Business Power of Attorney - Everything you need to know:
Most businesses plan for the future – strategy, recruitment, finance - all with a view to having a smoothly run and successful business.
Some things can’t be predicted. Recession, Brexit, who knows? And this makes those kinds of situations very difficult to prepare for.
But whilst a health issue for a business owner is something that cannot usually be predicted, it is something that can be prepared for.
Why is planning for ill health so important?
If a business owner is unavailable for an extended period of time, be it for a couple of months, or indefinitely, what will happen? Will your bank mandates be valid? Who can sign contracts, instruct debt collection, or pay salaries?
There is not usually an automatic right for another owner of the business to deal with the incapacitated person's affairs. Historically, if a company director or owner is mentally incapacitated they could be removed from their position. However, under recent rule changes, this is no longer the case.
You might find that your business loses out.
The biggest risk to a business is the bank. If a business owner has a health issue that makes it impossible for them to make decisions for a period of time, it can make the bank very nervous. And that can lead to them asking for repayment of any debts the business may have.
To make decisions on behalf of the incapacitated business owner, someone will need to get a court order which can take around six months. If the bank isn't prepared to wait, it may have disastrous consequences, and could even lead to the closure of your business.
What else could happen?
Even if the bank is patient enough to wait the six months or so whilst you get a court order, who can apply for the court order? It might be family members of the business owner. It might be a creditor. It might even be social services. How would you feel running a business with social services?
Costs for those kinds of court orders typically run into the thousands of pounds. Whilst ever the business owner remains incapacitated, the court will also charge annual fees. And if you want to make any significant decisions on behalf of the business owner, the court will require you to apply for another court order - with a further six month wait, and further costs.
What can you do about it?
Prevention is better than cure
Create a Business Power of Attorney specifically tailored for your business. You can plan as a business, ensure that only the people you want to be involved will be involved, and ensure your business doesn't miss a beat if one of your owners has a health issue.
You choose people who can make decisions on behalf of the business owner whilst they are incapacitated. It will allow the appointed people to sign documents, communicate with banks, and generally carry out the business owners duties on their behalf to make sure the running of the business is not affected.
Saves higher professional fees
The cost of a Business Power of Attorney is significantly less than a court order – usually more like £600-750. And even more importantly there are no further costs. No annual fees, and no further court orders required.
And, even more usefully, it is possible to have these costs classified as business expenses, and therefore save tax.