Decision making within a company is usually carried out by the company’s board of directors (and sometimes the shareholders, where required). But what would happen if a director or shareholder loses mental capacity and the ability to make decisions? In this situation, how a business is run will typically be documented under the company’s governing documents (or within contracts entered into with the other owners of business e.g. shareholders agreements).
As UK corporate legislation does not provide businesses with a straightforward remedy if this issue arises, it is important to ensure that, as a director or shareholder, you have a remedial plan in place so that the business can continue to run smoothly with someone able to make decisions on your behalf. This may include, for example, the ability to manage the banking of the company or enter into key contracts during the day to day running of the business. This could also be crucial where important company decisions need to be made and the necessary director or shareholder required to make the decision finds themself in an unfortunate situation where they are not able to make decisions for themself.
What is a Power of Attorney?
‘Powers of attorney’ refer to documents where one party gives the authority to act on their behalf to another person in a specified set of legal or financial circumstances. Many people are aware of Lasting Powers of Attorney (LPA’s) which are designed to allow close family or friends to act for an individual after they have lost mental capacity in relation to their health and financial affairs. Powers of attorney are in fact wider-reaching than that and can serve a variety of corporate purposes.
What are corporate Powers of Attorney?
A corporate power of attorney is normally given by the directors or the shareholders of a company to appoint another person to carry out responsibilities on their behalf. The power of attorney can be specific to certain matters, or general (giving your attorney power to act on your general instructions). Corporate powers of attorney are highly customisable and can allow the appointor to retain control over the term of the appointment and the precise matters for which the attorney is authorised.
A director or shareholder could give their attorney authority to carry out a specific role for them such as to attend a meeting of the company’s board and vote on their behalf. Alternatively, a director might, for example, take a leave of absence from work for a medical procedure and hand their full day to day responsibilities to their Attorney.
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If you would like to know more about whether putting in place a power of attorney for your business would be appropriate, please contact either Melissa Deutrom or Jodie Sainsbury.
