As a company director, you’re already well versed in juggling many corporate and legislative responsibilities. However, there’s one thing you may have overlooked that could end up causing your business partners or your family a lot of heartache should something happen to you. Being the sole director of a company comes with particular risks.
As part of any estate planning you’ve completed, you likely set up a power of attorney (POA) to ensure your wishes are carried out if you lose the capacity for decision making. You may have designated your lawyer or a loved one as your personal representative. You should be aware that any existing power of attorney does not cover your company.
If you’re the sole director of a company, you’ll need to set-up a separate corporate power of attorney to ensure the daily operations of your business can continue in your absence. Without a corporate power of attorney, your family or your lawyer cannot make any decisions for the business, meaning all operations might grind to a halt – harming the company in the process.
So, what is a corporate power of attorney? This document sets out the ability for someone else (nominated by you) to make business decisions on behalf of the company and otherwise maintain operations and control of the company. This is, of course, only activated if you are incapacitated. It’s so important to have this in place to ensure the company’s ongoing operation and the appointment of a new director, should you pass away. Section 201F(2) of the Corporations Act 2001 allows your nominated representative to appoint a new director with a corporate power of attorney in place. Without the POA, your company could potentially be frozen for a lengthy period, harming revenues and diminishing the company’s value for your heirs.
Like any legal document, your corporate power of attorney should be customized to meet your company’s needs. You might wish to restrict the scope of decision making, limit spending capacity, or otherwise constrain activities to maintaining business operations. Generally speaking, a corporate power of attorney would cover company transactions, including purchase, sale, lease and mortgaging of property, account reconciliations and payments, and employment where needed.
How can UX Law help?
As this document can be complex and has wide-ranging consequences if set-up incorrectly, it’s always a good idea to have a legal professional draw-up and execute a corporate power of attorney. The UX Law team is well-versed in corporate and start-up legal needs; speak to a specialist about keeping your company running smoothly in unfortunate circumstances.