Corporate succession planning – why your company needs a Power of Attorney

What is a Company Power of Attorney?

A Company Power of Attorney (also called a Corporate Power of Attorney) (“CPOA”) is a document executed by the directors of a company which gives an individual, a group of individuals, or another company the legal authority to exercise certain powers and make decision on behalf of the company.

There are numerous reasons why companies should have a CPOA in place – chief amongst those being that a CPOA allows for the usual operating of the company when key personnel (e.g. Directors) are unavailable, are unable or are incapable of making decisions for the company.  For example, if a Director was stuck abroad, or became unwell unexpectedly and was unable to manage the company’s affairs, a CPOA would provide for a nominated party to step in and continue to make decisions for the company. This can be vital for a company to continue trading or operations in the absence of a key decision-maker.

Depending on the specific terms of the CPOA, a company can permit an Attorney to sign contracts, manage bank accounts, pay invoices and execute legal documents on the company’s behalf.

Who can be a company’s Attorney?

In Australia, the Corporations Act 2001 (Cth) (“the Act”) regulates CPOAs.  Under the Act, a company can appoint the following as its Attorney:

1. A person (or people) who is over the age of eighteen (18) years, and who is capable of understanding the nature and effect of the power being granted;
2. Another company or other body corporate; and
3. A partnership or the Trustee of a Trust.

Why your company needs a CPOA

Imagine that Natasha, the owner and sole Director of a small-to-medium size event planning company is required to go on a 5-month trip to Europe, and will be unavailable to handle any company decisions or transactions during that time.

In this scenario, the ability for anyone to make decisions, execute documents and transact for the company would be significantly restricted without Natasha first executing a CPOA on behalf of the company, giving an Attorney (or Attorneys) the ability to carry on the company’s affairs.

Before Natasha leaves for her important trip, she executes a CPOA in favour of her most trusted and longest-standing employee, Emma.  After deciding on the specific powers that Natasha wants to give Emma, Natasha executes the CPOA on behalf of the company, giving Emma the ability to make all decisions for the company, excluding selling, mortgaging, or leasing any of the company’s real property.  Emma is now able to handle any important decisions and transactions in Natasha’s absence.

Whilst Natasha is on her trip, Blake, the Director of a long-term corporate client, wants to sign a contract for a large supply agreement, which will generate significant amounts of work for Natasha’s company over the next 24 months.  As Emma has the power to sign contracts of this nature under the terms of the CPOA, she signs the agreement, ensuring that the company’s affairs are carried on smoothly.

How we can help

At Coulter Legal, we provide tailored and personalised corporate and personal estate and succession planning advice, and can prepare CPOAs for your company.

If you would like to discuss preparing a CPOA for your company in more detail, your corporate succession planning generally, or your personal estate planning, please contact us on (03) 5273 5273 to book an obligation-free consultation with one of our specialised Wills, Estates and Succession Planning lawyers.