A company is a separate legal entity, however it can only act in the real world through its directors. For example, its directors can sign contracts, purchase property and pay employees on behalf of the company. What happens to a company if its directors are no longer able to make decisions or act for it? This can be especially problematic for companies with a sole director. This is where a Company Power of Attorney comes into its own.
Why do I need a Company Power of Attorney?
Many people understand the importance of having an individual Power of Attorney in place to safeguard against the uncertainties of life. An Enduring Power of Attorney enables another person (your Attorney) to manage your legal and financial affairs if you lose the capacity to do so, for example through illness or accident. A General Power of Attorney can be used to enable your legal and financial affairs to be managed where you are unavailable, such as where you are overseas for an extended time. But what if you are a director of a company? Your individual Attorney will have no power in those circumstances to take over running your business, such as paying employees, entering contracts and carrying on any legal proceedings. The Corporations Act 2001 requires documents to be signed by either the sole director/secretary of a company or, where there is more than one director, by two directors. If the sole director cannot sign documents on behalf of the company, the company cannot run its business. Having a Company Power of Attorney in place can be an important estate planning tool for directors.
When should I make a Company Power of Attorney?
A Company Power of Attorney would ideally be created when the company is first set up, to ensure the business is protected from the outset. However it is never too late for a company to enter into a Power of Attorney.
How do I make a Company Power of Attorney?
A company can make a Power of Attorney if the directors pass a resolution and sign a formal Deed creating a Power of Attorney. The powers a company can give to its Attorney can be as wide or restricted as deemed necessary by the board of directors. They may be limited in time or scope, however should be as broad as needed to enable the Attorney to properly run the business. The Attorney does not need to be an officer of the company, though it should be a person you trust to manage the company’s affairs. The Power of Attorney can even be given to more than one person.
Can I revoke a Company Power of Attorney?
A Company Power of Attorney can be easily revoked by the board of directors passing a resolution and signing a formal deed of revocation. It will automatically be revoked upon dissolution of the company.
Prudent estate planning
When making an Enduring Power of Attorney for your personal legal and financial affairs, you should also turn your mind to whether a Company Power of Attorney would be beneficial for any companies you are involved with. The Company Power of Attorney can be an important means of protecting your business during periods when you, as a director, are unable to manage to your company’s affairs.
If you think your company would benefit from creating a Company Power of Attorney contact Cheney Suthers today.