A company power of attorney is a legal document that allows a company to appoint an attorney to act on behalf of the company. It may help companies deal with the day-to-day management and financial affairs of the business. For example, it gives the attorney legal authority to enter into contracts on behalf of the company. This article will run through: 

  • what the attorney has the power to do; and 
  • the steps a company must take to appoint an attorney.

Attorney's Rights

In short, the attorney will have the rights that a company chooses to appoint to them. This means that the company has full control as to which matters the attorney may act upon on the company's behalf. 

The company power of attorney usually expressly sets out the range of "powers" which the attorney may act on. These may be related to:

  • dealing with property;
  • specific purposes or transactions (for example, negotiating and signing a particular contract); or
  • a general power for the attorney to act and make decisions on behalf of the company.  

It may also detail the length of time for which the attorney may be able to act.

The company power of attorney may give the attorney relatively broad or limited power. The company should carefully consider:

  • who the attorney will be prior to their appointment and whether you can trust them to act in the company's best interests; and
  • the extent to which the company will allow the attorney to act on its behalf.

The Company Constitution

In order to appoint an attorney, the company should first consult its company constitution (if it has one). The company constitution sets out the rules according to how you should run your company. If no company constitution exists, Companies Act 1993  determines the rights and obligations of shareholders and directors

The company constitution may set out the procedure that a company needs to undertake to appoint an attorney. If this is the case, the company should follow this procedure.

If the company constitution does not set out a process for appointing an attorney, or if no company constitution exists at all, the company can progress to drafting the legal document.

Company Power of Attorney

The company power of attorney will be the legal document that appoints an attorney to act on the company's behalf. It should set out the attorney's rights. The company must execute it correctly.

In order for the document to be valid, it must be in writing and the document must be signed by either:

  • two or more directors of the company;
  • the sole director (whose signature must be witnessed) if there is only one director of the company;
  • a director or other person or class of persons (whose signature must be witnessed) if the company constitution allows; or
  • an attorney the company appoints, if the company has already appointed this attorney and has the right to execute legal documents on behalf of the company relating to the appointment of a power of attorney.

Unless the company constitution states otherwise, the company may appoint one or more attorneys. 

When Should You Create a Company Power of Attorney?

Since powers of attorney can be very flexible, companies often use them in situations where something unpredictable occurs, which might slow down the company's processes. For instance, where a director who would normally sign documents on behalf of a company is away or ill. In that case, a power of attorney can give another person in the company the power to execute those documents instead of the absent director. Hence, the company's business can continue.

Other examples where you might create a company power of attorney include:

  • if a director is away on holiday and is unexpectedly difficult to contact; 
  • in companies with one or two directors, so that another person can be on standby in case one of the directors is incapacitated for any reason; or
  • to give a specific person authority in an area of specialty or expertise, such as property transactions or negotiations.

What Should You Consider?

The most important thing to consider is who to give the legal authority to when creating a company power of attorney. The legal powers your company grants through a power of attorney can be significant. Likewise, the decisions and acts of that person will be binding on your company. For that reason, it is essential to pick someone trustworthy and responsible, who will act in the company's best interests at all times.

When a company power of attorney is limited or otherwise restricted to a specific area or responsibility, it is also important to make this clear in the document and clear to the person who will have the additional legal powers. This helps minimise the risk that the person acts outside their legal authority. 

You should draft your company power of attorney in detail, given the significance of the legal powers which the document grants a person.

Ending the Company Power of Attorney

The company should refer to its company constitution to determine whether there is a process for revoking or ending a person's appointment as an attorney. Generally, you can revoke the appointment of the power of attorney at any time.

The company may also consider whether the appointment of a power of attorney will end naturally if the attorney's rights no longer apply. 

For example, if the attorney was only appointed for a specific transaction, and that transaction has now finalised, the attorney will no longer have the rights to act on the company's behalf for any other transaction. 

Ideally, the the document should expressly state that the company may revoke the attorney's appointment at any time. Further, the company should provide written notice of the revocation. This is so it can demonstrate that the attorney's appointment has been revoked.

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Key Takeaways

To ensure that the attorney's rights and obligations are in line with your company, speak to a lawyer when drafting your company power of attorney. The document should clearly set out the rights of an attorney and ensure that those rights do not extend to areas which the company does not wish to delegate.