Yesterday evening the news broke that the Prime Minister had been admitted to intensive care at St Thomas’ Hospital in London. He had previously been diagnosed with Coronavirus but his condition, we are told, worsened. It is an anxious time for the Prime Minister’s family and for all of us. We hope that – in the care of the NHS – his condition will begin to improve. Of course, many questions are raised by the Prime Minister’s absence: who will make decisions on his behalf and ensure the smooth running of government? We presume that there will be well-established contingency plans in place (because an interruption in leadership and decision-making would be particularly disruptive for the country at the moment).
But what about you? Would your family or your employees be able to handle your affairs if you yourself were in hospital (or self-isolating whilst looking after a vulnerable relative)? What would happen if you lost the capacity to give instructions from a distance?
Unless you have put in place a viable plan to allow someone else legally to make decisions and take action on your behalf, family life and business decision-making could grind to a halt.
Of course this is not a new problem and, fortunately, the law has offered a practical solution to these difficulties for some time.
Powers of Attorney granted by one person (the “donor”) to another (the “attorney”) can give the attorney the ability to make decisions or undertake certain actions on your behalf. There are two main types of Powers of Attorney: Lasting Powers of Attorney (themselves subdivided into two further types) and General Powers of Attorney which are often forgotten about.
Lasting Powers of Attorney (“LPAs”) allow the attorney to make decisions on behalf of the donor. Crucially this delegated power continues even if the donor subsequently loses capacity to do so themselves. The type of decisions that can be made on behalf of the donor depend on the type of LPA granted to the attorney.
A Health and Welfare LPA enables the attorney to make decisions about the donor’s medical care and other personal, day to day affairs (with certain restrictions, like not being able to vote on their behalf). A Finance and Property LPA enables the attorney to make payments on behalf of the donor from the donor’s bank accounts and deal with any land or other property belonging to the donor. Quite often, the attorney will hold both types of LPA and sometimes more than one attorney is appointed in the documents.
LPAs typically grant the attorney wide ranging powers, but an attorney cannot make use of those powers until the LPA has been registered with the Office of the Public Guardian. This registration process can take time, and in today’s climate, it is taking longer than usual. In these circumstances General Powers of Attorney (POAs) have proved useful.
These POAs can be used for a wide variety of matters, but, importantly (and in contrast to LPAs) they cease to have effect if the donor subsequently loses capacity to make decisions themselves. Unlike LPAs, they do not need to be registered with the Office of the Public Guardian and so they can take effect from the moment they are created by the Donor. This could be very useful in the current Lockdown situation.
For example, you could tailor and limit the POA to enable the attorney only to sign a very limited set of documents, for example when selling a property. Alternatively, you could delegate certain actions but only with express consent of the donor. So, in one sense, it gives the donor greater control and comfort over who is managing their affairs. But, again, this will only be useful – and the delegation only remains valid – when the donor can exercise control over their affairs.
POAs have a particular use in the running of companies. Typically, POAs are granted by a former shareholder to the purchaser of their shares (so that the purchaser can exercise their new shareholder rights without delay). This is useful because the legal ownership of shares does not pass until any stamp duty has been paid on the transfer; until the stock transfer form has been stamped by HMRC (if needed) and until the transfer has been registered in the company books. In other words, there is a gap between completing the share sale and the new owner being able to exercise any shareholder rights. Additionally, large companies often grant POAs to a number of individuals so that they can sign and execute documents on behalf of the company when the directors are unavailable to deal with the day to day affairs of the company. If directors are self-isolating, it may be useful to create a POA so that the company can continue to transact and run its affairs smoothly.
Properly delegated decision-making, via an appropriate power of attorney, has always been an important tool in helping our clients to manage their affairs. In today’s climate, for many, it has become essential.
To discuss your own personal circumstances please speak to your usual Druces contact or to Helen Freely at h.freely@druces.com or on +44 (0)20 7216 5521.
