While most people are aware they need a Will, and might have given clear directions as to how they wish their business duties to be dealt with after they pass, many don’t give a second thought to how their business would fare if they were suddenly mentally incapacitated.
It’s a common, although mistaken, assumption that where a business person has, in their personal capacity, an Enduring Power of Attorney (EPOA) in place for Property, that would allow their nominated personal representative to take over their business affairs as well. But it isn’t quite so simple.
While an EPOA does, in fact, continue after you lose capacity, it only gives your delegate power over your personal property – not trusts, businesses or companies, which are considered separate legal entities.
An ordinary Power of Attorney (POA) or Deed of Delegation would be the typical way a businessperson would give signing authority to a delegate if they were out of the country or temporarily unable to sign for the entity in question. This ceases to have effect, though, if the person giving the authority loses mental capacity.
However, if the incapacitated person is a director of a company, the company itself, as a distinct legal entity, can grant a POA in order to elect a new director or to appoint someone to vote on a specific matter. This is a good solution to cover a sole director-shareholder situation – but does involve some forethought and planning.
It is also worth noting that shareholder consent is often required to appoint a new director of a company. So, if an incapacitated person is a majority shareholder, then their Attorney for Property appointed via an Enduring Power of Attorney may be able to step in.
If nothing at all has been put in place by the person who has lost capacity (no EPOAs, no POA, no Deed of Delegation, or no allowance in the company constitution to appoint a POA), then an application to the Court to appoint a Property Manager (like the Public Trust), can be made.
While there is no silver bullet – especially for businesses that don’t fit in to any of the above categories – businesspeople cannot afford to procrastinate on this one: right now is the best time to assess what you have in place to keep your business functioning should you lose capacity, and bolster it, where needed.
Be sure to check your company constitution to ensure it allows for the appointment of a POA, if desired; confirm that you have an EPOA for Property in place appointing someone who understands your business; and, have a discussion with other people involved in your business to set up a contingency plan and make your wishes known to them, if they ever need to act.
Run your plans by your legal adviser to check you have the right bases covered as well as you can – and then enjoy the peace of mind that comes from knowing, in getting your affairs sorted, you’ve done the best by yourself, your loved ones, and any staff and business associates you have responsibilities to, should you be incapacitated.