What is a Company Power of Attorney?

Whilst you, as a business owner, will be used to making the key decisions for your company and signing off on relevant paperwork, there may be times when it would be helpful for someone else to jump in for you. This could be in situations that are out of your control, such as sudden ill health or, more optimistically, due to a long holiday away from the work laptop. In these cases, it can be useful to have a company power of attorney as a support mechanism to keep your company going during any extended absence. This article will outline what a company power of attorney is and how you can make use of it for your business. 

How Does a Company Power of Attorney Work?

A company power of attorney is a legal document, alternatively known as a corporate power of attorney. Whichever name you use, you can put it in place to allow another person, called the ‘attorney’, to act on your behalf and in your name when you are unavailable. 

Importantly, when putting the document together, the attorney must be appointed in writing. This is because when interacting with other parties, such as other businesses or a bank, your attorney must prove they have the power of attorney. They will do this by sending a copy of your written agreement.

When Will a Company Power of Attorney Operate?

These documents tend to be used to cover both foreseen and unforeseen events. Let us explore two scenarios that could affect you and your business and require a company power of attorney to avoid complications.

Foreseen events are predictable events that you, your company and your attorney know are coming up. For example, you could have a four-week holiday or three-month secondment in a few months time. A company power of attorney will allow you to make arrangements with the planned attorney so that they can take over stewardship during your planned period of absence.

Unforeseen events are much more unexpected in nature. One common example is if you or another director becomes seriously ill and cannot manage the business day-to-day. If you were to face a period of enforced bed rest after an urgent operation, having an attorney available to make the required decisions for your business would be very useful.

A lasting power of attorney could cover both of the above scenarios, both foreseen and unforeseen absences.

What Protects Me From the Attorney Making Dangerous Decisions?

The document should set out the exact limits of the power you wish to give to the attorney. In this way, the power of attorney document may only permit the attorney limited power, such as:

• making payment of wages; 
• validating invoices; and 
• other minor day-to-day decisions.

However, you may wish for the power to go further, such as if the attorney is your business partner. In that case, you could grant them much more extensive powers, otherwise known as ‘general power’, including greater authority over financial affairs.

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What Else Could a Company Power of Attorney Document Include?

A well-drafted document could also include:

1. the ability to pay the attorney for their period assisting your company during your absence;
2. that the attorney has the power to appoint a substitute in the event that they are not available to act during your absence; and
3. confirmation that your organisation will ‘indemnify’ the attorney from responsibility for financial harm to your company. Put simply, this is a way of showing the individual that your business does not intend to sue them for any lost monies during their stewardship.

Key Takeaways

At times, it can be difficult to plan for unusual and unforeseen circumstances, which can disrupt the effective day-to-day operations of your business. One way to assist is by understanding company power of attorney. This allows your nominated person to make business decisions in your absence based on how much authority you provide them with. It is essential that when assigning power of attorney, you do this in a written document that other businesses or legal bodies can receive a copy of. Lastly, ensure that your appointed person is aware of their legal obligations. They are bound by law to make decisions in the interest of your business, and any fraud or theft is illegal. 

If you need help with company powers of attorney, our experienced commercial 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 258 4780 or visit our membership page.