Most people are familiar with a Power of Attorney. It is a legal document that gives your attorney the legal authority to act on your behalf and look after your affairs, including financial affairs, in the event that you are unable to do so.
However, what most people don’t realise is that a Power of Attorney does not give your attorney the legal authority to act on your behalf as a director of any company of which you are a director.
This is because the role of director is not a property right, but rather a personal right, and much like executing someone’s will, cannot be delegated by a Power of Attorney.
Therefore, even if you have a Power of Attorney, if you are a director of a company it is important to also have a Corporate Power of Attorney for your company. A Corporate Power of Attorney authorises a person or persons to act on behalf of a company when the director is unable. Let’s look at why this is so important by way of some common and simple scenarios.
Your business is owned and operated by a company of which you are the sole director and shareholder. As sole director you are required to sign documents, enter transactions and generally authorise the company’s interactions with the world at large. As the sole director you are the only person permitted by law to do these things. In the event that you were to lose capacity unexpectantly due to accident or illness then there is no one legally able step in and act for you as director unless you have a Corporate Power of Attorney.
It is the same case in the event that a sole director and shareholder of a company was to pass away. Generally, when that happens there is a period of months between the date of the director passing and when probate is granted, which is the point when ownership of the company shares passes to the directors’ beneficiaries allowing them to appoint a new director. Where there is a Corporate Power of Attorney in place it can operate upon the director’s death straight away so that the company can continue to operate seamlessly.
A Corporate Power of Attorney is a highly effective document to minimise disruption and allow the continued operation of a company in the sudden event of the incapacity, death or unavailability of the director, and is therefore an essential document to have in place for prudent corporate governance and estate planning.
This is just an introductory summary of this area of law, there are many other aspects that may also be considered such as alternatives to a Corporate Power of Attorney (e.g. alternate director appointments), restrictions that may be placed on the authority and how these documents operate in the Self-Managed Superannuation scenarios – but those are for another day.
If you do not have a Corporate Power of Attorney in place contact Baker Love Lawyers today.