Business Law: Nick Palmer examines power of attorney in relation to businesses

Nick Palmer, a partner at Barker Gotelee

Nick Palmer, a partner at Barker Gotelee - Credit: Archant

If you run a business, what would happen if you became ill and unable to sign a contract or authorise a bank transfer?

Being out of action for a temporary period is clearly less problematic than permanent incapacity, but how long could your business cope, particularly with any uncertainty as to when you will recover?

You can include provisions in your articles of association or partnership agreement, and set up third-party arrangements to overcome many issues, but there will be some which can only be delegated by power of attorney. (Note, however, that authority as a director of a company cannot generally be delegated by a power of attorney.)

A power of attorney is the only way of authorising someone else to sign for you and make decisions on your behalf in relation to financial matters should you become mentally incapable of this yourself. If you have not made a power of attorney and become mentally incapable, the only means by which someone can manage your financial affairs is by applying to the Court of Protection for a Deputyship Order – an expensive and time-consuming process.

You may make a power of attorney for your personal finances, to cover your home, savings and investments, and choose to make a separate power, appointing different attorneys, for your business affairs. You can include preferences (non-binding guidance) and instructions (restrictions and limitations) for your attorneys, but you should think carefully before doing so as it can create irreversible difficulties later on.

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The Office of the Public Guardian (OPG), which oversees the registration of powers of attorney, has traditionally rejected preferences and instructions which it felt were inappropriate, conflicting with the wishes of those running a business who did not want their attorneys to have carte blanche.

The OPG sought recently to reject many such provisions included by a businessman in his power of attorney but the court has now ruled that these provisions (running to seven pages) were acceptable and the OPG had gone beyond its authority in rejecting them.

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This is helpful in reaffirming the right of individuals to make a power of attorney on their own terms. The Court noted that the provisions made the power “a lot less useful” but concluded that the client knew this and had made a carefully considered decision to include them because that is what he wanted.

: : Nick Palmer is a partner and a specialist in trusts and estate planning at law firm Barker Gotelee.

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