A Company or Corporate Power of Attorney is a document that authorises a person to act on behalf of the company, including signing documents on behalf of the company. When a director of a company falls ill or passes away and is incapable of making fundamental decisions, the company may not be able manage its assets, finances and business sufficiently or at all, especially in the case of a small company with a sole director.
A Company Power of Attorney is different to a personal Power of Attorney in that it is an appointment made by a company granting a person authority to act as a director of that company and make decisions with respect to the company’s affairs. A personal Power of Attorney is an appointment made by an individual granting another person authority to make decisions concerning that individual’s affairs- this does not extend to making decisions concerning the affairs of a company of which the individual is a director. A personal Power of Attorney will only permit the appointed attorney to act in the individual’s place as a shareholder, not as a director.
What happens if my company does not have a Company Power of Attorney and something happens to me?
If a company Power of Attorney is not in place and the sole director passes away, becomes mentally incapacitated or bankrupt, the business will essentially come to a standstill. The personal representative or trustee of the sole director may be permitted to administer the sole director’s estate, including appointing a person as the director of the company. However, in the case of death, delays may be experienced as a grant of probate is required first (unless urgent Orders are obtained).
If a Company Power of Attorney is in place, the business can continue to operate through the direction of the appointed Attorney.
Who should I appoint as the company’s attorney?
The company may appoint any adult or another company to this role. More than one attorney may be appointed. It is important to consider the circumstances and expertise of the prospective attorney. You may also set limitations on the period of the appointment and extent of their authority. It is essential to discuss the appointment with the prospective attorney/s to ensure they are aware of the effect of the appointment and any limitations.
It is highly advisable to seek legal advice prior to drafting a Company Power of Attorney. It is crucial to ensure the documents are drafted correctly and appropriate limitations and conditions applied. If you are a director of a small company without a Company Power of Attorney in place, contact us today to ensure your business succession planning requirements are in place.