What is a company power of attorney?
A company power of attorney is an important legal document made by a company that authorises a person (“the attorney”) to act on its behalf as well as to sign certain documents on its behalf.
Can your company lawfully appoint an attorney?
Section 124 of the Corporations Act 2001 gives all companies registered in Australia the legal capacity and powers of an individual both in and outside of Australia. As a consequence, a company can appoint agents and attorneys to act on its behalf.
What is the difference between a general power of attorney and a company power of attorney?
A general power of attorney allows an attorney to act on behalf of an individual in relation to the individual’s assets and financial affairs, whereas a company power of attorney allows an attorney to act on behalf of the company in relation to the company’s financial affairs.
Can a general power of attorney be used for company matters?
If you have granted a power of attorney over your personal financial affairs, it will not extend to your company’s financial affairs and as such, a general power of attorney can not be considered as a substitute to a company power of attorney.
Who can be appointed as an attorney?
Any person can be appointed as an attorney (this can be an individual or another company). In the case of an individual, they will be required to be over the age of 18 years.
What are the reasons for having a company power of attorney?
- The most common reason for a company to have a company power of attorney is to avoid the company being effectively ‘frozen’ in the event that one of the directors (or the sole director) is temporarily unavailable to act on behalf of the company. For example, the director may travel overseas and be difficult to contact, or they may lose capacity due to illness or accident. Accordingly, the company may suffer issues with cash flow and be powerless to act in the case of unexpected situations without a director available.
- A company power of attorney can also be used to ensure the company continues to operate smoothly for the period following the death of a director and before the executor is lawfully able to act, which can take up to several months. In many cases, a company power of attorney is a critical document for business succession and estate planning purposes.
Whilst it is clear that the above-mentioned situations affect a company with a sole director, it will also affect companies with two directors as, generally speaking, the Corporations Act requires two directors to execute documents.
Who should you appoint as your company’s attorney?
You should take great care when deciding who you should appoint as the company’s attorney as well as the period and circumstances of their appointment. In the case of appointing an individual as the company’s attorney, it is common to appoint your spouse or your accountant.
How can a company power of attorney be structured?
A company power of attorney can be structured in a number of different ways to suit your particular needs. Some of the available options when deciding the scope of the power of the attorney include:
- General powers;
- Limited in its operation; or
- for a specific purpose.
Preparing a company power of attorney
We can assist you with preparing a company power of attorney for your company.
If you have any questions or require any other information in relation to a company power of attorney, please do not hesitate to contact our office on (02) 9687 3755.