In your personal Power of Attorney document, you may nominate an Attorney who will be responsible for managing financial decisions on your behalf should you lose capacity.
The question is, if you are a sole director or director of a company or trust, can your personal Attorney make financial decisions relating to these entities on your behalf?
The answer is, no.
An individual Power of Attorney does not give rights to your Attorney to take on the role as director or make any decisions relating to the company. They can, however, make financial decisions for you as a shareholder.
This is why it is of extreme importance to have a company Power of Attorney so others in your company can continue to make decisions, be paid and continue the company after you lose capacity.
The importance of a company Power of Attorney
A company Power of Attorney is an essential estate-planning tool for those running a company or trust and should be set up when the company is first established.
Companies and trusts can execute a Power of Attorney (generally speaking), provided the board of directors sign a formal deed.
The board of directors can choose how extensive the document is and can choose if it is for a certain length of time, for a particular event or events or for a particular property.
The Power of Attorney can be given to one or more persons who may or may not be involved with the company.
What if the sole director/shareholder dies?
The Corporations Act 2001 under section 201F(2) provides that if a company’s sole director and shareholder dies, the deceased’s “personal representative” may appoint a person as the director of the company to carry on its business.
The Corporations Act in section 201F(4) specifies that a person with that power of appointment under subsection 2 of section 201F may appoint themselves as director.
But when a sole director of a company dies without leaving a will the complications and distress can have an even greater impact. The death will usually leave the company without any person properly authorised to immediately manage the company.
If you do not have a company Power of Attorney in place and be a sole director with no formal Will, those left running your company could be exposed to weeks or months without a Director in place as administration of the estate of the sole director will take time for The Public Trustee steps in to manage the estate or the Supreme Court grants Letters of Administration to someone to administer the estate.
The team at Donovan Oates Hannaford have years of experience in Estate and Business Planning.
We offer a refreshing approach to legal advice that is easily understood and is provided in a timely manner. Should you require any further information, please contact us on (02) 6583 0400 or firstname.lastname@example.org.