Company Power of Attorney
What is a company power of attorney?
A company power of attorney is where the company appoints another person to act on its behalf. The person the company appoints is called an ‘attorney’.
The company empowers the attorney via a company power of attorney. The company power of attorney allows the attorney to:
- sign on the company’s behalf
- carry out the company’s tasks
- have the legal authority to act on the company’s behalf
- look after the company’s affairs
This is important if the company directors are missing.
Example of how a company power of attorney works in Australia
The company must urgently sign a document. Where is the director? The director is sick, dead, suffering from dementia or overseas.
Thankfully, via Company POA the company had appointed an ‘attorney’. This is to sign legal documents on behalf of the company. This is called a Company Power of Attorney.
Company POA vs Human POA
A company POA is different to a human POA.
- Companys make Company POAs
- Humans make Enduring and Medical POAs
A company can not make an Enduring POA or a Lifestyle POA. Likewise, a human can not make a Company POA.
How is a Company POA different to an Enduring POA?
- Company Power of Attorney – a company appoints an attorney (the attorney is another company or human)
- Enduring and Medical/lifestyle POAs – a human appoints an attorney (the attorney is human only)
Benefits of a Company POA
Companys sign Company Powers of Attorneys. The company is appointing a human or another company to act as its attorney. The attorney now:
- acts on the company’s behalf
- authorises the attorney to act on the company’s behalf
- signs documents on the company’s behalf
Can the Company POA appoint both humans and another company?
The person the company appoints is called an ‘attorney’. Our Company POA is flexible. The company appoints:
- a human
- humans
- another company
- other companies
- any combination of the above
In contrast, a human POA (enduring or medical) only appoints humans.
Director gone walkabout?
Company POA saves the day
The Corporate POA provides:
- continuity of company affairs; and
- good stewardship.
This is especially if the director is missing.
Problem: A company acts through its directors. Directors sign documents and make decisions for the company. What if the director is missing, sick or unable to act? The company loses its ability to act. Without a functioning director, a company is a ship without a rudder.
Solution: The company, itself, appoints an attorney. This is via a company power of attorney. Under the corporate POA, the attorney has the power to do and sign things for the company. This includes signing documents and making company decisions.
Corporate POA protects the company
What happens if the director suffers death? Illness? Travel? Mental incapacity? Bankruptcy? Who looks after the company when the director is missing?
A Company Power of Attorney ensures your company continues to operate.
Two directors? But one is missing?
Does your company have two or more directors? Under the Corporations Act, at least two people sign all deeds. This is either two directors, or a director and a secretary.
Problem: Two directors: but one is missing. On the day of signing, you suffer a car accident.
Solution: The company appoints a person – an attorney. This is via a Company POA. Under the Company POA, that person signs the Deed.
Fund Managers and SMSF require a corporate trustee POA
For asset protection, most companies only have one director. If you have one director, then you only need that one director to sign Deeds. However, if you have two or more directors then you need two directors to sign all deeds.
Self-Managed Superannuation funds require all members to be trustees. And when the SMSF has a company as a trustee then all members must be directors of that corporate trustee. Therefore, many SMSF’s have two directors. Such SMSFs must have both directors sign. What happens if your spouse dies? You can not get your money out of a fund manager.
Two directors? Then the Corporations Law requires:
- two directors; or
- a director and a secretary
to sign Deeds.
If one director loses capacity or is unavailable, the company is unable to sign documents and enter into agreements. Corporate POAs fix this.
Corporate Trustee of your SMSF must have a Company POA
Example: Your Self-Managed Superannuation Fund has two members: mum and dad. The trustee of the SMSF is a company. The directors of the company are mum and dad. Mum dies. Mum has given a human POA to her son, Johnny.
Some fund managers, especially for Self-Managed Super Funds, require both directors to sign to release monies.
- Fund Managers do not accept a human POA for the director unable to sign. Johnny cannot sign on behalf of mum, as mum is acting as a director.
- Anyway, as mum is dead her human POA to Johnny no longer operates. A human POA dies when the person giving the POA dies.
The Company POA outlives the directors. A Company POA only stops working when the company, itself, dies.
Company constitution silent on company power of attorney?
An Australian company has legal capacity. A company is a person. (Sure, an unnatural person, but a person nonetheless.) As such, under the Corporations Act, a company is allowed to appoint an attorney. It is not necessary to have a specific power in the Company Constitution.
Our Corporate POA is drafted so that it does not matter the company constitution is silent on delegated authority.
The attorney can human or even another company.
Just use a ‘human’ Enduring POA from one of the directors?
There are company POAs. And there are human POAs (enduring and medical). Each State and Territory has its own set of documents for human POAs.)
An individual power of attorney gives your attorney legal authority to manage your assets and financial affairs when the individual is unable to do so. This is for illness, accident and absence. A company power of attorney authorises a person or persons to act on behalf of a company and or sign certain documents on its behalf.
A ‘human’ POA does not work. No, a key reason why company powers of attorneys are so important is that an individual power of attorney is not a substitute for a company power of attorney. Even if you have granted a power of attorney to someone to manage your financial affairs, this does not extend to your company and the attorney cannot sign documents on your behalf in your capacity as director of a company.
A company power of attorney is granted to a person or persons. The company power of attorney is unique to the company.
Can I use a “human” Enduring Power of Attorney for company matters?
No. A human power of attorney is not a substitute for a Company Power of Attorney. A Company POA is completely different.
- A human POA in Australia is called an “Enduring Power of Attorney”.
- Human medical/lifestyle POAs in Australia are called:
-
- Enduring Power of Guardianship – Western Australia, Tasmania and New South Wales
- Enduring Power of Attorney – Australian Capital Territory and Queensland
- Advance Personal Plan – Northern Territory
- Appointing Medical Treatment Decision Maker – Victoria
- Advanced Care Directive – South Australia
Neither an Enduring nor a Medical POA can be used to act for a company. Instead, you need a Company Power of Attorney.
Even if you, as a human being, have granted a power of attorney to someone to manage your financial affairs, this does not extend to your company. An attorney under an Enduring POA cannot sign documents on your behalf, in your capacity as director of a company.
Who can your company appoint?
The person you appoint (attorney) is:
- over 18 years of age
- of sound mind
- an Australian resident (telephone if the person is not an Australian resident for tax purposes)
Choose trusted family members and friends. Consider your accountant, financial adviser or lawyer.
Is the director liable for the acts of the Company’s Power of Attorney?
A director remains liable for an attorney’s actions. To reduce liability and promote accountability, the company may want to consider appointing two persons to act jointly, acting as a check and balance to each other. Again, it is important to think about who is suitable for the role of Attorney to avoid issues.
How does the Company Power of Attorney interact with my Will?
A Will is not a substitute for a Company Power of Attorney. This is because a Will only operates after a person dies. What happens while the executor administers the estate? A Company Power of Attorney ensures the continued operation of the company. This is after the director’s death.
Lose rights if I appoint a Company Power of Attorney?
No. If you are available and capable, you still have the authority to act for your company while a director.
Company Power of Attorney’s obligations?
A Company Power of Attorney must:
- Avoid conflicts of interest. This is between the attorney and the company.
- Act honestly.
- Act in the company’s best interest.
- Retain proper accounts and records;
- Keep the attorney’s finances and assets separate to the company’s finances and assets.
- Not pay themselves or others with the company’s money. This is unless directed to do so. This is different from claiming out-of-pocket expenses in carrying out the attorney’s duties under the company POA.
For help building your Company POA telephone us.
Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
After hours: 0477 796 959
National: 1800 141 612
Email: [email protected]
