The world we live in is becoming increasingly complicated in an attempt to prevent fraud and tighten security. How many of you have tried to make a call to the bank or even the gas company on behalf of another and been refused information due to not being the account holder? Or, tried to sign a document on behalf of a colleague or the company you work for, only to find you have insufficient authority to do so?
The answer to your frustrations could come in the form of a power of attorney…
What is a power of attorney?
A power of attorney (POA) is a document signed by one party (the principal) which gives authority to another party (the attorney) to act on their behalf and in their name. It is a legally binding document which must be created formally as a deed and not informally (for example, by letter or orally).
Do you need a POA?
If, for any reason, you are unable to look after your own affairs; if you are not available to sign documents in relation to a transaction; or if you just want added peace of mind, granting a power of attorney enables another person to look after your business affairs on your behalf and to make appropriate decisions on your behalf where you are unable or unavailable to do so.
What type of POA do you need?
Generally speaking, there are four types of POA, and each functions in a slightly different way:
- General POA – giving the attorney wide authority to do anything which the donor could do;
- Limited POA – limited to doing specific acts or things;
- Trustee POA – granted by a trustee; and
- Enduring POAs/Lasting POAs – where the attorney can act following the donor’s mental incapacity.
So who can grant a POA?
A POA may be granted by any legal person, including companies and LLPs (but not general partnerships), as well as individuals.
For a company, its articles of association must first be checked to ensure directors have the ability to appoint an attorney to act on the company’s behalf.
For an LLP, the relevant LLP agreement should be checked to see if it contains any limitation or restriction on the ability of the LLP to grant a POA. In the absence of any express limitation or restriction, the members of the LLP would be able to authorise the LLP granting such a power in accordance with the relevant procedure for members’ decisions under the LLP agreement.
Directors – beware!
In relation to directors, a person’s appointment as a director of a company is personal to them. As such, in the absence of an express provision permitting the director, as agent, to delegate their authority to someone else, they cannot do so.
Therefore, directors cannot delegate their powers and responsibilities as a director to an attorney unless this is specifically provided for in the articles. Note that a director may grant a POA enabling an attorney to sign documents on behalf of the director in their personal capacity, such as their service agreement, but any such power could not be used to enable the attorney to sign a document in the purported capacity of the director where they are signing on behalf of the company rather than them self personally. However, a POA can be granted by a company for an individual to act for and on behalf of the company.
So what should you do where a sole director is unavailable to sign documents on behalf of a company? Either:
- appoint an alternate director to act on their behalf, provided this is permitted by the articles of association; or
- execute a POA in the name of the company appointing an attorney to sign documents on behalf of the company itself.
Are there any specific legal requirements for a POA?
Yes, in order for a POA to be valid:
- it must be executed as a deed by the principal; and
- the attorney must be clearly identified in the power.
If the attorney does something which is clearly outside the scope of the authority granted to them by the relevant power, it will be void.
A POA can provide a useful safety net at times of difficulty. If there’s any risk that you will not be available to sign necessary documents, or there is any possibility that health problems may prevent you from handling your affairs personally, perhaps it’s time you considered preparing a POA…
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