Where SMSF member is overseas, missing, dead or of unsound mind.
Fund managers and life insurance companies demand all directors of SMSF corporate trustees sign to release monies. This is especially if the assets are in a Self-Managed Super Fund.
In all states of Australia humans can give ‘Enduring POAs‘ and ‘Medical/Lifestyle POAs‘. But Fund managers and life insurance companies accept neither. This is because a person holding an Enduring POA can not sign on behalf of a:
An SMSF can have one to six members. All members must also be the directors of the SMSF Corporate Trustee. But if you have two or more directors, then the corporations law requires:
Let’s say you have two directors. And one director loses capacity, dies or is unavailable. Then the SMSF corporate trustee company is unable to sign documents and enter into deeds. Appointing another person under a SMSF Corporate POAs is the remedy.
Q: My client has an SMSF. It has a corporate trustee.
The corporate trustee has one director. This is, of course, the single-member.
If she dies does the Legal Consolidated SMSF Corporate Trustee POA continue on? Is this not a breach of the Superannuation laws?
A: The Legal Consolidated company POAs continues on. This is after some or all the directors die. Afterall, this is one of its main purposes! So the answer is yes.
When the sole director/SMSF member dies the Legal Consolidated corporate POA continues on. It allows the people that the company appointed in the POA to continue to act in the company’s best interest. For example, this may be the old ladies children.
Remember it is the SMSF Corporate Trustee that gives the POA. The directors have nothing to do with Company POAs. It is not the directors giving the Corporate POA. It is the company giving the POA. How many times do I have to repeat this.
Under the Corporations Act your company gives a Corporate POA to person. Most accountants and advisers recommend that the SMSF Trustee company signs a corporate POA. Such SMSF Corporate POAs are common. They are not in breach of any Superannuation Law or SIS Regulations.
Obviously a SMSF with no members is a problem. It must be dealt with within a reasonable time. But these issues do not concern the validity of a SMSF Trustee POA. (Of course, a SMSF Trustee POA can help fix the the problem.)
Secondly, any company that has no directors also needs to be rectified. This blemish needs to be fixed within a reasonable time. However, this, again, has nothing to do with the validity of the SMSF Corporate Trust giving a POA to a person. (When you have no directors, the shareholders call a general meeting and appoint a new director.)
The SMSF corporate trustee can only a appoint a ‘human’ or a ‘company’. It cannot appoint a ‘firm’ or ‘partnership’.
So if your accounting house is a partnership then the SMSF corporate trustee could appoint one or two of the partners. Or if the accounting house is a company, then the SMSF corporate trustee could appoint the accounting house.
However, few accountants would want to take on the responsibility of holding a POA, of any nature. Few accountants would want to hold an enduring or lifestyle POA. And few accountants would want to hold a POA on behalf of a company. The job is too onerous. It is one of ‘utmost’ good faith.
Talk with your governing body, they probably will not allow it. Or caution you not to do it.
If they are silent on the matter, then I am suggesting to you that you should not hold any type of POA for a client. It is too dangerous:
For example, John and Jenny are the two members of their Self-Managed Superannuation Fund. They have a special purpose company as trustee of their SMSF. This is called a corporate trustee.
Both John and Jenny are directors of their corporate trustee. The Superannuation laws requires this.
Since the company has two directors for all deeds two people must sign. John and Jenny are required to sign all deeds together.
Sadly, John dies.
John has life insurance in his SMSF. Holding life insurance in your SMSF is tax effective and common. The 32% tax on life insurance at death is usually not applicable with a Superannuation Testamentary Trust in the Will.
Jenny goes to the life insurance company. She asks for John’s life insurance.
Sure, the life insurance is ready to hand over the money. “I just need you and John to sign the Deed of release.”
“But John is dead”, Jenny laments “that is the reason why you are paying out the life insurance!”
“Sorry, we cannot help you. Speak with your financial planner and accountant”, barks back the 18 year old person at the life insurance call centre.
Jenny holds an Enduring POA for John. But as her adviser correctly states “a POA cannot be used to sign on behalf of a director of a company”.
However, the adviser many years ago built a Company POA on our website for the corporate trustee. The company authorises a human (or another company) to sign on behalf of the company.
The Company POA authorises Jenny to sign on behalf of the company. Jenny signs the life insurance deed of release, as the companies’s POA and gets the life insurance.
I hope Jenny thanks the adviser that thought ahead.
This is the difference between a Company POA and an Enduring POA:
A company power of attorney is given by a company. The company appoints a human or another company to act and sign documents on the company’s behalf. A company power of attorney authorises a person or persons to act on behalf of a company. The attorney is allowed to sign documents on the company’s behalf.
The person the company appoints is called an “attorney”. Our company POA is flexible. The company appoints:
A: Of course not, only a company can give a Company POA.
A: That is correct. The person holding a company POA can be a human or a company. In fact the company can appoint humans and companies. A Company can appoint a human or humans. A Company can appoint another company or companies. A Company through a Corporate POA can appoint numerous humans and companies.
A: This is a trick question. Firstly only a human can make an Enduring or Lifestyle POA. And that human can only appoint another human (or humans). There is no place for a company in a EPA or Medical POA.
A: That is not a question. But you are correct. An Enduring POA has limits. The limits of a POA are set out here. The reason for this restriction is that a director of a company is obliged to give personal and careful thought on the operation of the company. The director cannot outsource that personal obligation.
In contrast, the company can merely appoint a person through a Company POA to act for the company.
A: No. Only a human can make an Enduring POA. And they can only appoint humans.
A: They must act together. If you want them to act separately then merely build two separate Company POAs.
For example, the company wants either Peter or Paul to sign documents for the company. The company builds a Company POA appointing just Peter. Later the company builds a second Company POA, this time, appointing Paul.
In contrast to a Company POA, in some states of Australia an Enduring POA often allows you to appoint two attorneys who can act ‘together’ or ‘together and severally’.
A: Yes, a company can give many Company POAs. This is to many different people. They can act severally. This means that one can do something. And then another attorney can do something different. So choose your trusted attorneys carefully.
The SMSF corporate POA provides continuity of company affairs and good stewardship. This is especially if the directors are missing.
A SMSF company acts through its directors. (The Directors are also the Members of the SMSF.) 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.
The company, itself, may appoint 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.
What if the director is unavailable? What if your director is going on holidays? What if your director loses mental capacity?
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.
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.
There are hints as you build your document. For more legal advice telephone us. We are a law firm. We can help you answer the questions.