Under section 10(2) of the Mental Capacity Act 2005 (the Act), an individual who is bankrupt may not be appointed as donee of a lasting power of attorney (LPA) in relation to P’s property and affairs.
The bankruptcy of a donee is also one of the prescribed grounds for an objection to be made to the Public Guardian against the registration of a lasting power of attorney, where the power relates to P’s property and affairs.
Baroness Ashton of Upholland made the following statement in Committee Stage during the Act’s passage through Parliament:
“We have therefore decided that the Office of the Public Guardian will check to see if prospective financial attorneys are bankrupt when an LPA is to be registered. That information will be available to the Office of the Public Guardian throughout and should make it unnecessary for the donee to agree a statement to that effect or for it to be included on the notification. If the donee is bankrupt, then the LPA is invalid. That will achieve the noble Earl's objective” [Official Report, House of Lords, 27 January 2005; Vol. 668, c. 1417-1418.]
In the light of this statement, and although there is no statutory obligation to carry out these extra insolvency checks, this has been the practice of the Office of the Public Guardian since the implementation of the Act in 2007.
The Public Guardian has recently made an assessment of the effectiveness and value of this checking process. From 1 April 2010 to 31 March 2011, over 152,000 LPAs were registered and subject to a search on the ISBR. Of all these checks however, only one attorney was found to have been bankrupt at the point of registration. In addition, these checks can only ever identify bankruptcy at the point of registration—not at any other point in the ongoing life of the LPA as a legal document.
Given the nugatory work and the additional bureaucracy, this practice will cease with immediate effect. Objections to registration of an LPA on the grounds of a donee’s bankruptcy may still be made and in such circumstances the Public Guardian will not register the instrument in line with the Act’s requirements.