Who makes decisions for a company when directors are away, sick or have died?
Who arranges for employee salaries to be paid or signs legal documents on behalf of the company in circumstances where the directors are unable to?
What is a Company Power of Attorney
A company power of attorney (CPOA) is a document in which the director(s) of a company appoint an attorney to act on behalf of the company in either broad or limited circumstances. The appointment of the attorney can be suspended until such time as either one or more directors have lost capacity (deemed by a medical practitioner) or can be open to allow the attorney to make decisions in circumstances where one or more directors are unavailable.
Why every company needs a CPOA
The requirements of a company do not stop just because a director has fallen ill, passed away or is on a much-deserved holiday. A CPOA is crucial to ensure that the company does not sit “unnecessarily” stagnant or prevented from operating because of the absence of a director.
Under section 127 of the Corporations Act 2001 (Cth), documents can be executed by a company in the following ways:
- two directors of the company (s 127(1)(a)); or
- a director and a company secretary of the company (s 127(1)(b)); or
- if it is a proprietary company that has a sole director, that director if they are the sole company secretary, or the company does not have a company secretary (s 127(1)(c)).
A CPOA provides protection to the company in the event that a director is unavailable, and the company needs to continue operating, despite the absence of a director.
Decisions the attorney can make
An attorney appointed under a CPOA can, for example:
- Pay employees
- Pay any bills of the company;
- Sign documents which bind the company; and
- Make decisions in relation to the day to day running of the company.
A CPOA allows a director to also take well deserved holiday time with their family and friends whilst still ensuring there is someone on the ground to facilitate operation of the company.
Importantly, if a director was to pass away, the attorney would be able to continue operation of the company and facilitate either a transfer or sale of the business.
Does my personal power of attorney apply to my company?
No, an enduring or general power of attorney of a director of a company is not the same as a CPOA. This is because the company is a separate legal entity to its directors and must therefore appoint its own attorney.
At Transitus Legal, we offer a business focused estate planning package which includes estate planning documents for our director clients, and a CPOA. Our team is highly experienced in all things business law and are ready to assist.
Author: Kayleb O’Connor