Business LPAs Explained: Who Will Run Your Company If You Lose Capacity

Most business owners protect their assets with insurance or agreements, but few stop to think about what would happen if they suddenly couldn’t make decisions.

If you became seriously ill, injured, or lost mental capacity, who would sign contracts, pay staff, or access company bank accounts?

Without a Business Lasting Power of Attorney (LPA) in place, your company could be left in limbo.

What Is a Business LPA

A Business LPA allows you to appoint one or more trusted people - known as attorneys - to make business decisions on your behalf if you lose capacity.

It is separate from a personal LPA. A personal one covers your finances, property, and health matters, while a Business LPA is limited to your company responsibilities.

For example, if you are a director, partner, or sole trader, your attorney could:
• Access business bank accounts and pay suppliers
• Authorise contracts and sign legal documents
• Handle payroll, tax, or VAT issues
• Communicate with customers, suppliers, and regulators

The goal is to keep your company running and your staff protected until you recover or your affairs are permanently restructured.

Why It Matters

If you lose capacity without a Business LPA:
• The company’s bank accounts may be frozen
• Employees might not get paid
• Directors or partners could be blocked from making urgent decisions
• Major contracts could collapse if no one is authorised to sign

Incorporated businesses are particularly exposed. Most banks will not allow anyone to act for a director who has lost capacity without formal authority from the Court of Protection.

That process can take several months and cost thousands in legal fees, leaving the business unable to trade effectively in the meantime.

How It Differs From a Personal LPA

A Personal LPA and a Business LPA can work side by side, but they have different scopes.

Personal LPA:
• Covers your personal finances and health matters
• Lets a family member or friend manage your money and care decisions

Business LPA:
• Covers only business interests and decisions
• Appoints someone with professional or commercial experience
• Prevents overlap or conflict with your personal attorney

The two documents must be drafted carefully so one does not cancel out or override the other.

Advantages of a Business LPA

• Ensures continuity - your company can keep trading without interruption
• Protects staff and customers from sudden disruption
• Reduces the risk of bank or regulatory intervention
• Prevents the need for expensive Court of Protection applications
• Provides clarity on who has legal authority to act

Drawbacks to Be Aware Of

• It must be registered with the Office of the Public Guardian before it can be used, which can take several weeks
• Choosing the wrong attorney could create risk if they misuse authority or lack business understanding
• It costs more than a personal LPA due to its complexity and the need for tailored legal advice

However, the cost is minimal compared to the potential loss if a business is left paralysed because no one can act.

What Happens If You Do Not Have One

If a business owner or director loses capacity without a Business LPA:
• The company may be unable to operate its bank accounts
• Staff may go unpaid or suppliers left waiting
• Clients could cancel contracts if deadlines are missed
• The only alternative is a Court of Protection deputyship - a slow, costly, and highly restricted process

According to the Federation of Small Businesses, around 73 per cent of small business owners have no succession or incapacity plan in place, even though illness or accident is more common than many realise.

Who Should Have a Business LPA

• Sole traders whose business depends entirely on them
• Company directors with significant control
• Partners in professional practices such as accountants or solicitors
• Anyone whose absence would stop operations or access to funds

Having one shows professionalism and responsibility to clients, staff, and investors alike.

In Summary

A Business LPA ensures your company can continue operating if you are unable to make decisions.

• A personal LPA protects your home life and finances
• A business LPA protects your livelihood and everyone who depends on it

Without it, even a short period of incapacity could cause lasting financial damage.

You might need one or both, but knowing which applies to your situation could save your business time, money and stress later.

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