Many clients engage in business through a number of different entities, such as sole trader status, partnerships, companies, and trusts. Legally, individuals are separate entities to the companies which they control. This means that a personal power of attorney will not allow your attorney to act on behalf of your company, even if you are the sole director and shareholder.
For business owners and company directors, ensuring continuity of operations during absence or incapacity is essential.
A company power of attorney enables a company to appoint a trusted person to act on its behalf in legal, financial, and commercial matters. This is particularly important where directors are unavailable due to travel, illness, or competing commitments, as many transactions such as signing contracts, dealing with financial institutions, or completing property settlements require valid execution by or on behalf of the company.
It is especially critical for companies with a sole director, where there is otherwise no alternative authorised signatory.
A common misconception is that a personal general or enduring power of attorney can address these issues. However, a personal power of attorney operates at the level of the individual, not the company. It permits the attorney to step into the shoes of the individual in their personal capacity, for example, to exercise rights attached to shareholdings. This may include voting as a shareholder.
The key limitation is that a personal power of attorney does not confer authority to perform the functions of a director or act on behalf of the company itself. Directors hold a separate legal office with distinct duties and powers under the Corporations Act 2001 (Cth) and those powers cannot be delegated through a personal power of attorney.
As a result, an attorney under a personal power may be able to control shareholder decisions but cannot validly execute contracts, approve transactions, or otherwise manage the company’s affairs as a director.
Accordingly, relying solely on a personal power of attorney creates a critical gap. To ensure full operational continuity, clients should implement a company power of attorney (or appropriate governance arrangements) in addition to personal estate planning instruments.
Contact our office today to discuss putting the right structures in place to protect your business and ensure it can continue operating seamlessly when you are unavailable.
About the Author
Winona Page is a Senior Associate Solicitor at Commins Hendriks. Winona attends our Coolamon office and would be happy to provide tailored advice.