Does Your Company Need a Power of Attorney?

What is a Power of Attorney?

Many people are already familiar with the concept of a Power of Attorney, which is a legal document that allows you to appoint someone to manage financial and legal decisions on your behalf. An Enduring Power of Attorney has the additional function of continuing to operate even if you have lost the ability to make decisions for yourself or to instruct the person you have appointed to act for you.

We recommend that all adults have an Enduring Power of Attorney in place, to ensure that their legal and financial affairs are looked after in the event of a sudden loss of capacity to make those decisions themselves.

What does this mean if you are the director of a company?

You might have already been diligent in ensuring that you have your personal documents in place, including an Enduring Power of Attorney (if you haven’t, please call us to get the process started). However, have you ever considered what would happen to your company if you can’t continue in your role as director because you lost your capacity to make decisions? Even if you have a personal Enduring Power of Attorney in place, it doesn’t give rights to your Attorney to take on your role as director or to make decisions on behalf of the company. If you are also a shareholder of the company, your personal Attorney may, under some circumstances, act on your behalf as shareholder to appoint a replacement director.

If you are the sole director and shareholder of a company and you pass away, there may be a delay until the executor of your estate can step in as your legal personal representative or until ownership of the company shares can pass to your beneficiaries, allowing them to appoint a new director. Without having someone immediately authorised to sign company related documents, operate the company bank accounts, sign cheques or to make decisions, the company may come to a complete standstill.

This may also be prob­lem­at­ic for two direc­tor com­pa­nies. Section 127 of the Corporations Act 2001 (Cth) requires two direc­tors or a direc­tor and a sec­re­tary of a com­pa­ny to exe­cute documents. If one director los­es capac­i­ty or dies, the com­pa­ny may be pow­er­less to sign doc­u­ments or enter into agreements if the requirements under the Corporations Act have not been satisfied.

The good news is, we can help you prepare a company Power of Attorney to ensure that the company can continue to operate seamlessly in these circumstances.

What is a company Power of Attorney?

A company Power of Attorney (also referred to as a Commercial Power of Attorney) allows a company to appoint a person to act as the company’s attorney. The attorney will then have the power to do the things that the Power of Attorney authorises them to do on behalf of the company. The company Power of Attorney document may limit the scope of the pow­er including when the pow­er applies, and the types of deci­sions that may be made.

Key Takeaways

• Every adult should have a personal Enduring Power of Attorney in place.
• A director of a company should also consider a company Power of Attorney to ensure the seamless and continued operation of the company if the director suffers a loss of capacity or dies.
• A company Power of Attorney is a legal document where the company appoints a person to act on its behalf, who will have the power to make decisions or act on behalf of the company.

If you have any questions or you need help with your succession planning, please contact our Wills & Estate team on (02) 9964 0499.