If a person loses capacity to deal with their financial assets and they have made a Lasting Power of Attorney for Property & Financial Affairs before that point in time, their Attorneys can act on their behalf to deal with their financial affairs.
Unless the Lasting Power of Attorney says otherwise, the Attorneys can act in respect of personal financial affairs as well as business financial affairs.
The extent to which the Attorneys can act in relation to a business are limited by a number of factors:
• Whether the person is only a Shareholder.
• Whether the person is a Director and if so, what the Articles of Association say.
• Whether there is a Shareholder’s Agreement.
• Any further documents that relate to the running of the business.
More recently incorporated companies will probably be incorporated using the Model Articles set up under the Companies Act 2006. These were amended from effect of 28th April 2013 by Section 3 of the Mental Health (Discrimination) Act 2013. Therefore even if a company incorporates the Model Articles, it may be that the Company Director’s role is treated in a different way if it was set up after 28th April 2013.
Before 28th April 2013, the standard articles state that a person’s role as Director would cease as soon as they lost capacity. This would mean, unless the Articles specifically allowed a director to remain in place, they would automatically be removed.
Even for companies incorporated after 28th April 2013, the standard articles still do not allow a director to delegate his or her responsibilities, meaning, unless the Articles specifically allow a director to delegate his or her responsibilities, that an Attorney would not be able to act on a Director’s behalf in that role. An Attorney, however, could act on behalf of a Shareholder in anything that could be done by that person as a Shareholder unless a document such as a Shareholder’s Agreement says otherwise.
Of course many companies will have their own bespoke Articles of Association or may even incorporate an earlier version of the Companies Act.
If you are a major Shareholder and/or Company Director then you ought to seek advice as to what your current situation is, particularly if your company would be brought to a grinding halt if you were to lose capacity.
It is sensible for every individual to do a Lasting Power of Attorney but particularly for major Shareholders and Company Directors it can have a knock-on effect on the running of your business; therefore, proper advice, which might include amending the Articles of Association or Shareholder’s Agreement, ought to be sought.
If you have any questions regarding this, please contact me or someone else in our team to discuss this further. You can also contact our Commercial team for advice on your business.