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Every business needs a decision-maker. Many companies only have one main decision-maker, but what happens when that decision-maker is unavailable due to absence or health-related reasons? This is where having a company power of attorney (or corporate power of attorney) could benefit your business. This article will explore the benefits of having a company power of attorney and what you should consider before appointing one.
Company Power of Attorney
A company power of attorney is a legal document allowing another individual (labelled the ‘attorney’) to act on your behalf when you are unavailable. The document confirms that the primary decision-maker grants some (or all) of their powers to the attorney when unavailable.
Some Company Power of Attorney documents specifically define ‘unavailable’ as any (or all) of the following:
- long-term ill health of the primary decision-maker or director;
- long-term annual leave;
- a period of secondment; or
- any period in which that person has provided a form of written consent for the attorney to act.
Benefits of a Company Power of Attorney
The main benefit of a company power of attorney is allowing the business to run effectively without the primary decision-maker. For example, if you cannot work due to health reasons, the document enables the attorney to step in and make critical decisions for your company on your behalf. Alternatively, many power of attorney documents also cover planned periods of absence, such as annual or parental leave. Having a Power of Attorney document can alleviate the burden placed on the director or main decision-maker in ensuring the business continues to run in their absence.
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Limiting the Attorney’s Power
A Power of Attorney document can limit the decision-making abilities granted to the attorney. For example, you may constrain the attorney’s powers to:
- ensuring payment of wages and invoices from third parties;
- allowing minor expenses payments to staff; and
- allowing regular day-to-day decisions (excluding the hiring and firing of staff and the ability to bring legal action against other companies).
However, if you have a high degree of trust in the attorney, perhaps because they are in a senior position within the company, such as COO, you could grant them powers similar to your own. Examples of ‘major’ decision-making powers can include:
- advertising job vacancies and recruiting new staff;
- carrying out disciplinary processes and dismissing staff;
- handling legal proceedings and having the ability to start or settle legal claims;
- having access to the main bank account of the business;
- selling company assets and property; and
- shaping the resources and direction of the company.
Considerations Before Granting a Company Power of Attorney
Firstly, you should consider whether you are happy giving another individual legal authority to handle your business affairs. If the idea makes you uncomfortable, you could expressly limit a power of attorney to take effect upon certain conditions. For example, the document may be used in the event of mental incapacity or lengthy medical treatment, rather than during any annual leave period
Additionally, it is vital to appoint an attorney with the ability and experience to run your business. It is not just a matter of trust. It is unsuitable to appoint a family member or loved one if they do not have the required experience or knowledge to run the company successfully.
Finally, it is essential to obtain expert legal advice before granting a company power of attorney. The document can present the individual with significant power and the chance to make decisions you strongly disagree with. However, a solicitor can ensure the wording limits any future attorney to only making minor decisions. For example the document may limit the individual to making wage payments and invoice payments. This will ensure the company can function until your return.
Key Takeaways
A company power of attorney allows an individual to act on behalf of the main decision-maker when they cannot. A power of attorney document protects your company’s interests during unforeseen events. Since the document presents significant power over your business to another individual, you should seek legal advice when. This will ensure the attorney’s powers are limited to what you are comfortable with.
If you need help with company powers of attorney, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
If you become unavailable for a lengthy period and no Company Power of Attorney document exists, this may negatively impact your business. For example, your business will be vulnerable due to the inability to make and authorise significant decisions. Of course, the company can apply to the Court of Protection to appoint a deputy, but this process can be time-consuming and expensive. Furthermore, there is no guarantee the deputy will be someone you trust.
Not always, no. Most partnerships contain a Partnership Agreement providing arrangements if a partner becomes unavailable. However, if the Partnership Agreement does not, it should be amended or a Company Power of Attorney made for each partner.
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