Legal updates

A power of attorney shall not be revoked if made to ensure existence of a company

December 8, 2019

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. The father lost his legal capacity and the validity of the power of attorney was questioned.
The Court held that the power of attorney is valid even though the grantor lost his legal capacity. By law, an ordinary power of attorney falls through, inter alia, upon loss of legal competence of the grantor. However, when the power of attorney was given to guarantee the right of another or of the person who received the power and their right depends on it, the power is deemed irrevocable and is not revoked under such circumstances. Here, a founder and owner of a group of companies gave a power to his children for a period of 20 years and for the benefit of a third party, the company, which was his life enterprise. The company has an independent right to continue to exist and function properly, on a regular and stable basis, even though its owner lost his legal capacity. Because the power was given to ensure the company's ability to continue to exist even in the absence of his legal capacity (including voting rights and decision-making at general meetings), the power of attorney should be regarded as irrevocable.