How Should A Power Of Attorney Be Granted In The Commercial Context?

• Published date: 08 July 2021
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Contracts and Commercial Law, Shareholders
• Law Firm: Dentons
• Author: Mr Ahmed Mudathir and Matthew Literovich

This article briefly explores the use of powers of attorney in the commercial context (such as in a shareholders agreement) in light of Ontario's current common law and statutory framework and provides some considerations to be kept in mind when attempting to institute a power of attorney in a commercial agreement.

What is a power of attorney and what governs it?

According to Justice B. R. Warkentin in Daley v. Daley,¹ a power of attorney is a legal document granting the person appointed (the "attorney") the fiduciary obligation to utilize the power granted on behalf of the grantor of such power solely for the purpose of benefiting such grantor, as the use of the power to provide a benefit to the attorney without authority being a breach of the fiduciary obligation.

Notwithstanding the foregoing, the enactment of the Powers of Attorney Act² and the Substitute Decisions Act³ in Ontario supplanted the common law with respect to powers of attorneys,⁴ including the requirement that a general power of attorney was terminated on the grantor's mental incapacity or death.⁵ Under these legislative enactments and pursuant to the POA Act, a general power of attorney for property allowed the attorney to do on behalf of the grantor anything that the grantor could lawfully do by an attorney⁶ while the SDA provided comprehensive governance for continuing powers of attorney for property and for powers of attorney for personal care, amongst other things.⁷ The SDA established that (i) under a continuing power of attorney for property (a "CPOA"), an attorney can make financial and property decisions for the grantor, whether the grantor was mentally capable or incapable; and (ii) under a power of attorney for personal care ("POAPC"), an attorney can make substitute decisions about the healthcare, nutrition, care and safety of the mentally incapable grantor.⁸

How does the legislative landscape apply to commercial powers of attorney?

A power of attorney in the commercial context may be caught under the SDA provisions and deemed a CPOA where it expresses the intention that the authority given may be exercised during the grantor's incapacity to manage property,⁹ which results in several drawbacks which may complicate or defeat such a grant in the commercial context, including that:

• A grantor of a CPOA is capable of revoking a CPOA at any time they are capable of granting a CPOA,¹⁰ and a CPOA is terminated when the grantor executes a new CPOA (unless the grantor provides that...