4 December 2015 09:00
Is your business at risk without a POA?
Almost half of small business owners are aged over 55, and yet few have made plans to cover serious illness or physical or mental incapacity.
Law firm Moore Blatch is warning that millions of small businesses are at risk of collapse, if the business owner were to become temporarily incapacitated and unable to sign company documentation.
Very few business owners have a Lasting Power of Attorney (POA) in place, according to Moore Blatch. Without a POA many business-critical financial transactions could not take place, such as contractual arrangements, banking and financial transactions or the renewing of leases for example.
In the UK, around 47% of small business owners are aged over 55, a figure that is increasing annually, and 23% of owners have a longstanding illness or disability. Around 62% (3.3 million) of all UK businesses are sole proprietorships; 30% are companies and 8% are partnerships.
Although it is possible to apply to the Court for a Deputyship to deal with an individual's personal and business affairs whilst incapacitated, Moore Blatch says this could take up to six months, by which time the business may have ceased to operate.
Philip Whitcomb, Senior Solicitor, taxes and trusts at Moore Blatch, said:
"Many people are aware of the importance of having 'key person' insurance to protect the business in the event of a death. But most don't consider what happens in the event of incapacity and an inability to carry out business-critical decisions."
He added: "Company directors should also review their governing documents, such as the articles of association, since they may contain provisions on the incapacity of directors. I believe a Lasting Power of Attorney should be viewed as another insurance policy vital to the ongoing success of the business."