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A power of attorney lapses upon loss of legal capacity even if made to ensure existence of a company

March 16, 2021

A founder and shareholder of a group of companies granted a power of attorney to three of his six children to ensure proper management of the company. Later, the father lost his legal capacity.
The Court held that the power of attorney is invalid and expired upon the loss of the father's legal capacity. Under law, agency falls through, inter alia, upon lost of legal competence of the principal. An exception to this is when a power of attorney is given to guarantee the right of another or of the person who receives the power and their right depends on it. Here, the founder and owner of a group of companies did not make an lasting power of attorney but gave a regular power of attorney to his children for a period of 20 years that was allegedly for the benefit of a third party, the company, which was his life work. A company has three organs: the General Meeting, the Board of Directors and the Management which rights to "exist" do not depend on an agency under the power of attorney of the controlling shareholder and therefore, the power was not granted to secure the rights of a third party, the company. Moreover, under law, a general power of attorney not given to a lawyer must be notarized and here the power of attorney was an ordinary one, which also makes it unenforceable.