Q. How do I get a power of attorney for a major shareholder who has Alzheimer’s disease?
A: You may have a problem obtaining a power of attorney depending on the state of the Alzheimer’s disease. It may not be possible to get a power of attorney if the major shareholder is already suffering the effects of the disease. If she still has lucid moments and the capacity to understand the legal consequences of granting another a power of attorney, it may be possible to have a lawyer prepare a power of attorney to sign in the presence of a notary. In the event that she does not have the requisite capacity, you may have to discuss guardianship with her family or next of kin.
In any event, to get a power of attorney, you should consult an attorney to draft appropriate provisions that will ensure someone has the “power” to act for another. Those provisions could be broad or very specific. Once the terms are agreed, it must be signed in the presence of a notary. In the event that the mental capacity is questionable, I would have at least 2 witnesses attest that the one granting the power of attorney has the proper capacity.
Q. Does someone need any specific capacity to enter into a contract for the company like you need for a power of attorney?
A: To enter into a binding contract, you must have an offer, acceptance and consideration. Generally speaking, an offer is simply an offer to provide product and/or perform services. Another party must agree and then offer some type of consideration (i.e. traditionally money). Generally, a contract, with some exceptions, can be oral and enforceable. Many believe they have entered into a binding contract if they simply have the offer, acceptance and consideration elements only. However, Texas recognizes many affirmative defenses and arguments against enforcement of contracts, whether written or oral. Without limitation, capacity is a huge factor. Clearly, a Judge should not enforce a contract made with a party who is clearly incapacitated and did not understand the effects of the agreement. Moreover, fraudulent inducement is a defense to the contract enforcement. Many elements must be proven and analyzed before relying on some of these defenses.
Another legal term of art is “meeting of the minds” which suggests that the party to a contract agreed to the terms before execution and thus the contract should be enforced. Absent a meeting of the minds, a contract should not be enforced. It is much easier to prove a meeting of the minds when the contract is written.
The final advice is to fully understand what documents you are signing on behalf of your business and be sure to have legal counsel review them and their effects. Remember not to sign a contract that you have not read and fully understand because it is a difficult battle to challenge a contract that bears your signature somewhere on the four corners of the document.
Q. Is it proper to do estate planning for shareholders?
A. This is a tricky question that has some pros and cons. Obviously, estate planning can only be done with the permission of the shareholder and at his/her request. It is not uncommon for shareholders to request estate planning be done to ensure that “outsiders” do not inherit shares (especially in small corporations) and to ensure that money may exist to pay off corporate debts of the shareholder. Nonetheless, this must be discussed with a qualified estate planning attorney in light of the corporate needs. Estate planning is always a good idea generally.
Editor's note: The information in this column is not intended as legal advice but to provide a general understanding of the law. Readers with legal problems, including those whose questions are addressed here, should consult attorneys for advice on their particular circumstances.
