A company power of attorney is an important legal document made by a company that authorises an individual to act and sign certain documents on its behalf.

This individual is called an 'attorney'. A company power of attorney can authorise the attorney to execute any documents referred to in the power of attorney, including specific types of documents or any documents determined by the company.

According to law, a company has the capacity of a legal person and acts through its directors. This means, for example, that a company can enter contracts in the same way that an individual can. Directors sign documents and make decisions on behalf of the company. However, if the directors cannot act on behalf of the company, the company cannot operate effectively.

A company power of attorney involves the company’s directors appointing a person to act as the company's attorney. That attorney will then have the power to do the things that the company power of attorney authorises them to do. This may include executing documents (for example, signing contracts) and making company decisions.

There are several important questions to consider when granting a company power of attorney, including:

1. Do you need a company power of attorney?
2. Can your company lawfully appoint an attorney?
3. Who should you appoint as the company’s attorney?

Do you need a company power of attorney?

The most common reason for a company to grant a power of attorney is if one or more of the directors, who would usually sign documents on behalf of the company, is unavailable. For example, if the director is away on holiday or business and is difficult to contact, the company may not be able to execute documents which rely on the director's signature.

A company power of attorney may be particularly important in a small or start-up company. For example, in companies with only one director, if that director is out of contact or loses the capacity to sign business documents, the business will come to a standstill if no one else is authorised to sign off on cheques or key documents affecting cash flow. For companies with 2 directors, corporations law requires 2 directors or a director and a secretary of the company to execute documents. This means if one director loses capacity or is unavailable, the company may not be able to sign documents or carry on business. A company power of attorney can solve this problem.

Can your company lawfully appoint an attorney?

Corporations law grants companies the legal capacity and powers of an individual, both in Australia and overseas. A company is therefore authorised to appoint an attorney or an agent on terms determined by the company. The attorney or agent can be either another company or an individual.

Who should you appoint as the company's attorney?

You should take care in choosing the right person to appoint as your company's attorney. You will also need to determine the period of the attorney's appointment, and any limits on their authority. Delegating authority to a person who does not otherwise have that authority should always be well documented in a company power of attorney. In addition, you should always clearly communicate to the attorney the limits of their power so they understand what they can and cannot do. This will help minimise the risk of the attorney acting outside their authority.

Conclusion

A company power of attorney is a legal document where the company appoints another person (the attorney) to act on its behalf. It's important because it gives another person the power to carry out tasks for the company in situations where the company itself (by way of its directors) is unable to act. Therefore, appointing an attorney for your company is a serious undertaking. You should carefully consider who you wish to appoint as an attorney and make sure you document the appointment properly.

For personalised advice on company powers of attorney, contact Hardies Lawyers today. Explore our blog for more insights into business succession planning and stay informed about the latest strategies to future-proof your business.

Disclaimer: This article is for educational purposes only and does not constitute legal advice. You should seek legal or other professional advice before acting or relying on any of the content.