Business Power of Attorney

[numbersrule]

Having been operating as Power of Attorney due to ill health of a family member recently, it has prompted me to consider how my own Businesses would be managed in the scenario where I was ever to lose mental capacity. I am in good health at present touch wood.

I understand a Business Power of Attorney can be Registered with the Office of the Public Guardian.

I am the Sole Director, Sole Shareholder and Sole Employee of four Limited Companies.

Does a separate Business Power of Attorney have to be made for each Limited Company?

I assume so, because my understanding is that the Ltd is the Donor.

The Model Articles of Association allow for a Director to be removed if a Doctor confirms mental incapacity for more than 3 months. But to what extent can this provision be inadequate and are there particular reasons why the option of a Business Power of Attorney was invented?

Regarding Continuity of Service ( or lack of ) for unfinished work, to what extent can Contractual Terms and Conditions simply state that all Contractual Responsibilities will cease where mental incapacity of Sole Director is confirmed? Most of my work has timeframes of less than 3 months, so it seems to me that most unfinished work would be a casualty ( and therefore a potential problem for my Clients ) before the Model Articles 3 month provision could be implemented anyway.

My current thinking would be to appoint my local Solicitor as Attorney and give them the power to Appoint themselves as new Director to simply facilitate Dissolution via DS01 after all Contractual Responsibilities have ceased for 3 months ( different 3 months - DS01 ).

But having said all this, I would be grateful for Forum views on how things would play out via the Model Articles provisions and in the absence of a Business PoA.

Thanks.

 

[Newchodge]

Having been operating as Power of Attorney due to ill health of a family member recently, it has prompted me to consider how my own Businesses would be managed in the scenario where I was ever to lose mental capacity. I am in good health at present touch wood.

I understand a Business Power of Attorney can be Registered with the Office of the Public Guardian.

I am the Sole Director, Sole Shareholder and Sole Employee of four Limited Companies.

Does a separate Business Power of Attorney have to be made for each Limited Company?

I assume so, because my understanding is that the Ltd is the Donor.

The Model Articles of Association allow for a Director to be removed if a Doctor confirms mental incapacity for more than 3 months. But to what extent can this provision be inadequate and are there particular reasThons why the option of a Business Power of Attorney was invented?

Regarding Continuity of Service ( or lack of ) for unfinished work, to what extent can Contractual Terms and Conditions simply state that all Contractual Responsibilities will cease where mental incapacity of Sole Director is confirmed? Most of my work has timeframes of less than 3 months, so it seems to me that most unfinished work would be a casualty ( and therefore a potential problem for my Clients ) before the Model Articles 3 month provision could be implemented anyway.

My current thinking would be to appoint my local Solicitor as Attorney and give them the power to Appoint themselves as new Director to simply facilitate Dissolution via DS01 after all Contractual Responsibilities have ceased for 3 months ( different 3 months - DS01 ).

But having said all this, I would be grateful for Forum views on how things would play out via the Model Articles provisions and in the absence of a Business PoA.

Thanks.

It is pointless having Articles that allow the removal of a Director if there is only one Director, because there is no-one to remove them and no-one to replace them.

Let's make the awful assumption that you had a serious accient today and were completely incapacitated:

As you are the sole employee no work would be done. There would be no-one to even inform the clients.

If someone else had Business Power of Attorney and used it to appoint themselves as Director, they would take on the responsibilities of a Director. I don't think those could be limited so they would have to deal with all the casualty clients. A solicitor would charge a fortune for that commitment, even if they could take it on.

I would suggest, as a start, that you discuss this with your local solicitor, at the same time, discuss what would happen were you to die suddenly.

Could I also suggest that your local solicitor may, or may not, have the exoerience as a commercial solicitor that this might need.

 

[Daybooks]

By way of example my professional body requires me to have a continuity partner for such occurrences. It is not binding on the clients but does provide an initial safety net.

Something worth considering?

Four companies - interesting!

 

[numbersrule]

It is pointless having Articles that allow the removal of a Director if there is only one Director, because there is no-one to remove them and no-one to replace them.

Let's make the awful assumption that you had a serious accient today and were completely incapacitated:

As you are the sole employee no work would be done. There would be no-one to even inform the clients.

If someone else had Business Power of Attorney and used it to appoint themselves as Director, they would take on the responsibilities of a Director. I don't think those could be limited so they would have to deal with all the casualty clients. A solicitor would charge a fortune for that commitment, even if they could take it on.

I would suggest, as a start, that you discuss this with your local solicitor, at the same time, discuss what would happen were you to die suddenly.

Could I also suggest that your local solicitor may, or may not, have the exoerience as a commercial solicitor that this might need.

Thank you Cyndy

I have set up an appointment with my local solicitor and will post updates in due course.
My Will already enables the Executors to appoint a new Director.
In either scenario of Lack of Capacity or Demise, it seems to me that most right thinking Clients would understand that they'd have to make alternative arrangements for unfinished work.
I don't intend the Attorney(s) to take on responsibility for unfinished work and I take Daybooks' point that Continuity Partners may be something to offer as an initial option thereby taking that specific responsibility away from the Attorney.
But notwithstanding that I may start to include a new sub clause in the termination section of the Ts & Cs.
The sole aim of the replacement Director would be to achieve Dissolution of each Company.

Having thought about it though I suppose in the scenario where nothing was done, where bills went unpaid, accounts went unfiled, fines were incurred and action was taken by creditors then ultimately the Companies may be Dissolved by default eventually, but my Estate would incur costs and Beneficiaries would be disadvantaged. So the cost of a solicitor may be worthwhile, particularly as a lot of stress would be avoided if my family knew everything was being taken care of.

 

[Lisa Thomas]

Maybe consider adding another shareholder, with the ability to appoint a new director, if required.

 

[numbersrule]

Maybe consider adding another shareholder, with the ability to appoint a new director, if required.

My understanding is that it is more straightforward to set up a BPoA than it is to get a Shareholder's Agreement to do what it needs to.

PoAs are established structures.

Using a Shareholder's Agreement in the way you describe is not what I would call an established structure.

 

[Newchodge]

Thank you Cyndy

I have set up an appointment with my local solicitor and will post updates in due course.
My Will already enables the Executors to appoint a new Director.
In either scenario of Lack of Capacity or Demise, it seems to me that most right thinking Clients would understand that they'd have to make alternative arrangements for unfinished work.
I don't intend the Attorney(s) to take on responsibility for unfinished work and I take Daybooks' point that Continuity Partners may be something to offer as an initial option thereby taking that specific responsibility away from the Attorney.
But notwithstanding that I may start to include a new sub clause in the termination section of the Ts & Cs.
The sole aim of the replacement Director would be to achieve Dissolution of each Company.

Having thought about it though I suppose in the scenario where nothing was done, where bills went unpaid, accounts went unfiled, fines were incurred and action was taken by creditors then ultimately the Companies may be Dissolved by default eventually, but my Estate would incur costs and Beneficiaries would be disadvantaged. So the cost of a solicitor may be worthwhile, particularly as a lot of stress would be avoided if my family knew everything was being taken care of.

I worry here that you are expecting your clients to accept that you are a one person organisaiton, (which you have to tell them) and the consequences of that fall on them! I would not place a supplier contract with a one person company if they have no fall back position My position is, I accept, a bit weird as I am a one person organisation with no fall back position, which I should start to think about.

 

[numbersrule]

I worry here that you are expecting your clients to accept that you are a one person organisaiton, (which you have to tell them) and the consequences of that fall on them! I would not place a supplier contract with a one person company if they have no fall back position My position is, I accept, a bit weird as I am a one person organisation with no fall back position, which I should start to think about.

The Construction Industry and the Accounting and Bookkeeping Industry are both full to the brim with one person businesses with no fall back positions.

My first one person business was formed 10 years ago today. At no time in the entire 10 years has any Client ever queried whether I am a one person business and neither has any Client ever asked for evidence of a fall back position.

It's good to read that I may have given you some food for thought!

 

[Newchodge]

But notwithstanding that I may start to include a new sub clause in the termination section of the Ts & Cs.

Won't that be a giveaway?

 

[eteb3]

It is pointless having Articles that allow the removal of a Director if there is only one Director, because there is no-one to remove them and no-one to replace them.

I think this is confusing members and directors: while directors can sometimes remove directors, that power properly belongs to the members.

That said, company articles can give a non-statutory power to appoint or remove directors to anyone - eg, model articles for a membership CIC give power of appointment to the personal representatives of the last member to die, in the case that the company has no director and no members. You could easily adapt that clause to refer to mental incapacity.

But I definitely agree with @Newchodge that this is one for a solicitor. Not least, member ≠ director ≠ company.

Does a separate Business Power of Attorney have to be made for each Limited Company?
I assume so, because my understanding is that the Ltd is the Donor.

Correct, but a company almost never needs an attorney (a special and powerful kind of agent), because it habitually acts through its ordinary agents, its directors. The only time a company needs to act for itself (or else have an attorney act in place of the company, rather than in place of its directors) is when entering into deeds.

A director can't (afaicr) act by an attorney, because the office is personal. But you could have a clause appointing a named alternate by default in the event of your incapacity.

To my way of thinking the easiest thing is to appoint one or more of your family as attorneys for yourself personally. In the event of your incapacity, they act for you in your capacity as a member, and can remove you as director and appoint another in your place - whomever seems suitable. As Newchodge says, the new director would have fiduciary duties to the company, which can't be ducked easily. But the articles could cut the responsibilities down a bit (compare security documents that relieve a bank of the obligations of a mortgagee in possession), or limit the director's powers (as in charitable companies, where an inquorate board has power to act only to appoint further directors or to wind the company up).

Regarding Continuity of Service ( or lack of ) for unfinished work, to what extent can Contractual Terms and Conditions simply state that all Contractual Responsibilities will cease where mental incapacity of Sole Director is confirmed?

Unless the term is unconscionable (a very high bar to clear), an English court will uphold the rights of parties to contract as they please. So "to the extent of your client's prior consent" is the answer.

Miscellaneous thoughts:

• If you appoint your solicitor as attorney for the company, your family will have almost no way of controlling costs: their professional duty is to the company, to the exclusion of your family (and even of yourself).
• Consider how incapacity for these purposes is to be determined. The law likes binary switches: the conventional "written opinion of a medical practitioner received by the company" is suitable - as long as the medic knows to write the letter!
• Beware conflicts of interest: it's hard enough keeping the company, its sole director, and its sole member separate enough to satisfy legal requirements. Add an attorney for any one of them into the mix and you much increase the risk of someone having an insurmountable conflict.

Maybe consider adding another shareholder, with the ability to appoint a new director, if required.

This is nice and simple. While you hold 99% of the shares, they're powerless. When you're powerless, they have plenary control - they don't need a PoA. Just make sure the right people have the share/s, and consider locking up the articles so they can only be amended if you (or your attorney ) is present and voting at the meeting.

 

[numbersrule]

Won't that be a giveaway?

What makes you think I am hiding something?

 

[numbersrule]

That said, company articles can give a non-statutory power to appoint or remove directors to anyone - eg, model articles for a membership CIC give power of appointment to the personal representatives of the last member to die, in the case that the company has no director and no members. You could easily adapt that clause to refer to mental incapacity.

Thanks for alerting me to that option, but my aim is to avoid burdening my personal representatives because they may be family members without business experience. Also, more generally, I wish to create a separation between my Will, which is a personal document, and a Business Power of Attorney, which would be confined to business aspects.

Unless the term is unconscionable (a very high bar to clear), an English court will uphold the rights of parties to contract as they please. So "to the extent of your client's prior consent" is the answer.

Thanks, I would draw any new clause to the Client's attention so they would enter the Contract fully aware and with prior consent.

Miscellaneous thoughts:

• If you appoint your solicitor as attorney for the company, your family will have almost no way of controlling costs: their professional duty is to the company, to the exclusion of your family (and even of yourself).

More on this following imminent meeting with solicitor.....

• Consider how incapacity for these purposes is to be determined. The law likes binary switches: the conventional "written opinion of a medical practitioner received by the company" is suitable - as long as the medic knows to write the letter!

Yes, even though I intend to separate family and business, clearly a personal representative will need the medical letter for my personal Power of Attorney and I will be leaving my personal representatives instructions about the various notifications and evidencing that will be required, e.g. Accountants, Insurers and Banks and equally Business Attorneys.

• Beware conflicts of interest: it's hard enough keeping the company, its sole director, and its sole member separate enough to satisfy legal requirements. Add an attorney for any one of them into the mix and you much increase the risk of someone having an insurmountable conflict.

More on this following imminent solicitors meeting....

This is nice and simple. While you hold 99% of the shares, they're powerless. When you're powerless, they have plenary control - they don't need a PoA. Just make sure the right people have the share/s, and consider locking up the articles so they can only be amended if you (or your attorney ) is present and voting at the meeting.

I really don't like the idea of a shareholder's agreement for this purpose. It may seem nice and simple on the surface but underneath lies a potential for misunderstandings.

 

[eteb3]

a Business Power of Attorney can be Registered with the Office of the Public Guardian

I missed this, sorry.

That's not correct, if by Business PoA you mean an attorney for the company.

There are only two sorts of Lasting Power of Attorney, and they are for individuals, not for companies: Health and Welfare, and Financial Affairs. Financial Affairs would include dealing with your personal rights as a shareholder of your companies, but no stronger involvement in the company than that.

As I said above, I think that is all any attorney would need, because a sole member of a company has ultimate control.

But I look forward to an update when you've spoken to the solicitor.

 

[numbersrule]

I have always prided myself on being organised and having an overall strategy in life, the universe and everything.

However, having spoken to Solicitors, Accountants, Insurers, Banks and Web Domain Hosts it transpires that I have got an awful lot of sorting out to do.

Firstly, Solicitors don't want to be Attorneys. Solicitors can prepare BPoA.

Solicitors say would your Accountants be Attorneys. Awaiting response. But problem is, now that I am a bookkeeper, I took the annual filings back in house so recently I have been filing the accounts myself. Accountants response will be interesting.