Such clauses are likely to be discriminatory under current equalities legislation and the company’s ability to remove a director could be complicated. It is important, therefore, that a company or partnership’s governing documents are reviewed and, if necessary, amended at the time a business LPA is drafted.
Even without an LPA any attempt to unseat an incapacitated director or partner would be likely to be open to legal challenge under discrimination legislation.
It will, therefore, in most cases be in the interests of the company or partnership to cooperate at all stages.
While the purpose of any LPA is to protect the interests of the donor, a well-drafted business LPA will also provide stability and continuity for all concerned.
Interaction with other powers of attorney
Many businesses use standard powers of attorney (PoAs) as a matter of course. Because of this some clients might believe they already have suitable protection in place.
However, the PoAs most businesses establish are not lasting powers of attorney.
The key difference here is that if the donor loses decision-making capacity then the PoA cannot be used – the opposite of the situation with an LPA.
A business LPA can be used as soon as it is registered if the donor authorises it.
This means that in the day-to-day course of business the attorney could sign off on financial transactions while the donor was otherwise occupied (perhaps taking a sabbatical they have been considering) and could also step in if illness or injury occurred and the donor lost the capacity to make their own decisions.
Donors may have made Enduring Powers of Attorney before LPAs were introduced in 2007 or may have made general financial LPAs.
The business LPA will not automatically replace previous documents so it is important to check they will work together effectively.
Temporary incapacity
Clients tend to think of LPAs as being permanent arrangements, and in some cases they will be.
However, there will be other cases in which business owners or directors temporarily lose capacity if illness or injury affects their mind or brain, but from which they can be hoped eventually to return to full capacity.
In other cases they will retain full decision-making capacity but might not have the physical ability to carry out their executive functions – perhaps while undergoing aggressive medical treatment – or they may simply wish to take a proper holiday.
In all these cases a business LPA can step into the breach.
Appointing suitable attorneys
An attorney should have the ability and experience to make the decisions that fall within their remit. They should also understand that remit, and its limits.
