The vast majority of Powers of Attorney that the firm drafts, is in respect of people who wish to ensure that should they lose their mental capacity, or indeed wish somebody else to represent them for their Financial Affairs and Health and Welfare, they ask for the appropriate Powers of Attorney to be prepared.
This by its nature tends to be elderly people, as either dementia or Alzheimer’s diseases are beginning to set in.
However, people’s health no matter what age, can deteriorate rapidly in certain circumstances, and some people have businesses, or are self-employed, or are directors of companies, and indeed maybe a sole director or a sole share holder in small to medium sized business.
How can you protect your business, should you lose some capacity?
We advise in such circumstances for example, a sole director and sole share holder of a business, should ensure that a Power of Attorney for Property and Financial Affairs is entered into. This must be done whilst the person has capacity. Should that person lose mental capacity, the company could end up without either a share holder or a director capable of acting, this is an unacceptable position, that may lead to the businesses collapse.
To avoid that from happening you should consider appointing somebody (perhaps a family friend, or a trusted friend, or a business advisor), such as the company accountant, as Attorney under a Lasting Power of Attorney (LPA), who can exercise the rights as a sole shareholder, should you lose mental capacity, you may wish to appoint more than one attorney, if you so wish.
It should be noted that the attorney will not be able to exercise the power to act as a director of the company under the LPA, however, as such the first act of the attorney will be necessary to appoint a new director of the company, who can ensure that suppliers and staff continue to be paid, and contracts are filled in the period after you have lost capacity.
Should you lose capacity without an LPA in place, an application to the Court of Protection will need to be made to appoint an individual (what is known as ‘A Deputy’), to step into the director’s shoes as a shareholder. These applications tend to be expensive and time consuming.
They can take up to nine months to one year for the Court to appoint a deputy, and the Court can ask numerous enquiries and requisitions which have to be answered. Often as not, the company will not last that period of inactivity and administration. Without a director capable of overseeing day to day management, the business may fold during this period.
At the same time as making the LPA, you should pass a special resolution to amend the Articles of Association of the company, to give the director (as a sole shareholder), an explicit right to appoint one or more attorneys under the LPA, to exercise shareholders rights if the capacity is lost, and in those circumstances to give those attorneys an explicit right to appoint a director. The provisions relating to the incapacity of a director should also be reviewed. These often provide that the office of a director is vacated in the event of incapacity or absence.
There are some practical considerations you should also consider, in that you should make a Memorandum of Wishes, to sit alongside the LPA. This would be private between you and your attorneys, in which you could set out detailed wishes in to how your attorneys should run the business. It is also appropriate in our experience, that all banking mandates should be reviewed and time should be take to explain to the bank what you are doing, and to ensure that any mandates that they need in respect of the attorneys are completed.
Should you wish any support in respect of the above, please do not hesitate to contact us.