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How ought to an influence of legal professional be granted in a industrial context? – Firm regulation / enterprise regulation

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This article briefly examines the use of powers of attorney in a business context (e.g., in a shareholders’ agreement) in light of current Ontario common law and legal framework and provides some considerations to be considered when granting a power of attorney in a trade agreement.

What is a power of attorney and what does it regulate?

According to judge BR Warkentin in the Daley v. Daley1 is a power of attorney, a legal document that grants the appointed person (the “lawyer”) the fiduciary obligation to use the power of attorney granted in the name of the principal for this purpose only, since the exercise of the authority, the lawyer without power of attorney granting an advantage constitutes a breach of duty of loyalty.

Notwithstanding the foregoing, the enactment of the Powers of Attorney Act2 and the Substitute Decisions Act3 in Ontario replaced common law on powers of attorney4, including the requirement that a general power of attorney be terminated in the event of intellectual disability or death of the issuer. 5 Under these statutes and under the POA Act, a general power of attorney for property allowed the attorney to do whatever the grantor could lawfully do through an attorney on behalf of the grantor6, while the SDA provided comprehensive governance for ongoing powers of attorney for real estate and for Powers of attorney for personal care, among other things.7 The SDA stated that (i) in the context of an ongoing power of attorney for real estate (a “CPOA“), a lawyer can make financial and property decisions on behalf of the testator, regardless of whether the testator was mentally capable or incompetent; and (ii) within the framework of a power of attorney for personal care (“POAPC“), an attorney can make alternative decisions about the health, nutrition, care, and safety of the mentally retarded donor. 8

How does the legal landscape for trade powers apply?

A power of attorney in a commercial context may fall under the SDA provisions and qualify as a CPOA if it expresses the intention that the authority granted can be exercised during the inability of the issuer to manage the assets9, which leads to several disadvantages which can complicate or nullify such a grant in a commercial context, including those:

  • A issuer of a CPOA can revoke a CPOA at any time if it is able to issue a CPOA, 10 and a CPOA is terminated if the issuer executes a new CPOA (unless the issuer provides that there are multiple CPOAs should give), the CPOA revokes or dies, 11 which can destroy the intention to have the power of attorney irrevocably in the commercial context;
  • The lawyer has to give an account of his handling of the testator’s assets, 12 which is often not intended in a commercial context, since the power of attorney is granted in favor of the lawyer; and
  • The attorney must act as “a trustee whose powers and duties for the benefit of the incapacitated person are exercised and fulfilled carefully, honestly and honestly and in good faith” 13, which would nullify the power of attorney granted in a commercial context.

Is there another power of attorney in a commercial context?

According to the Court in Wilkinson v. Young14, a power of attorney relating to a grantor’s property may be exempted from the general restrictions on termination imposed by common law in the event of intellectual disability or death of the grantor, which can also be distinguished from the CPOA under the SDA:

If a position is set up against payment or in a document and the purpose of the position is to safeguard the interests of the proxy, the power of attorney generally cannot be revoked, ie if the power of attorney is associated with an interest, the power of attorney is generally irrevocable […] Even if a power of attorney is given to a buyer against value and is designated as irrevocable, the power of attorney is neither revocable nor is it revoked by the death or disability of the donor. In all cases, however, in which the agency is set up free of charge and only for the benefit of the client, it ends by operation of law with the death or mental incapacity of the client

Therefore, when drafting a power of attorney in a commercial context, it is recommended to make it clear that the power of attorney is (i) a worthwhile consideration in order to secure an interest of the lawyer (ie that the power of attorney is “connected with an interest”) and is irrevocable; ( ii) is not subject to the SDA, even if the authority granted may be exercised during the deceased’s inability to manage assets; and (iii) not subject to the common law requirements that the attorney owes the grantor fiduciary obligations or that the grant be paid in the event of death or Invalidity of the grantor ends.

In addition, as under the SDA, a CPOA must be carried out by two witnesses (who may not be the attorney or his partner or the grantor’s partner or child), 16 a power of attorney is unlikely to have to testify in a business context and it is recommended that in such a situation, no more than one person, if any, (this may be the attorney or their partner or the grantor’s partner or child) to distinguish such a grant from a CPOA. However, this factor is not decisive.

Footnotes

1 2015 ONSC 6741, paras. 92-93.

2 RSO 1990, c. P.20 [POA Act].

3 1992, SO 1992, c. 30th [SDA].

4 Minor note 5 to para. 51.

5 Spar Roofing & Metal smallplies Limited v. Glynn, 2016 ONCA 296, para. 50 [Spar Roofing].

6 small note 2, s 2.

7 smallra note 5 to para. 51.

8 JB v. De Souza, 2018 ONSC 4061 at 15
[De Souza].

9 Minor note 3, page 7 (1).

10 Ibid., P. 8 (2).

11 Minor note 3, p.12 (1).

12 Ibid., P. 8 (1) (d)

13 Ibid., P. 32 (1).

14th [1972] 2 OR 239.

15 Ibid. and p. 2.

16 Supra Note 3, p.10.

About Dentons

Dentons is the world’s first polycentric global law firm. As a top 20 company on Acritas’ 2015 Global Elite Brand Index, the company seeks to challenge the status quo by delivering consistent and uncompromising quality and value in new and inventive ways. With a goal of creating a competitive advantage for our customers and connected to the communities in which our customers want to do business, Dentons understands that understanding local cultures is critical to successfully doing a business, resolving a dispute, or resolving a problem business challenge is. As the world’s largest law firm, Dentons’ global team develops agile, bespoke solutions to meet the local, national and global needs of private and public clients of all sizes in more than 125 locations in over 50 countries. www.dentons.com

The content of this article is intended to provide general guidance on the subject. You should seek expert advice regarding your specific circumstances. Questions specific to this article should be directed to the author.

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