Without a Power of Attorney in place, you risk your business coming to a complete halt if you get sick or injured and are unable to make decisions for yourself. You may never need to use it, but knowing it’s in place can bring peace of mind.
A Corporate Power of Attorney is the person (or people) that you appoint to act on your behalf in financial matters (money, bank accounts, shares, real estate and other such assets) if you are incapable of doing so yourself. Although it requires a legal document it is very much about your relationships first and foremost.
Who can be your Power of Attorney
You can appoint anyone over the age of 18 that you trust with your affairs – a friend, family member, business associate or professional advisor.
And, it can be more than one person for different aspects of your business. For example, you might have an employee that you trust to make day-to-day decisions for the business operations, but you think your partner would be more appropriate to make decisions about your financial accounts. It’s important to choose people you feel are able to represent your interests and who are willing to take on the responsibility.
Talk to the people who are willing to take on the role and make sure they’re familiar with the business and your goals.
Consider roles and responsibility
Next you need to consider the scope and limits of each person’s decision making responsibilities. For example, you might be okay with your employee making financial decisions up to $5,000, but after that require your employee to make such decisions in collaboration with your accountant.
According to Larissa Howard from Catherine Henry Lawyers, you can be as specific as you need to be.
“The more consideration you give this process, the more effectively your business can be maintained if you are incapacitated,” says Larissa.
Documents you need
To legitimise your decisions, you will need to prepare a Power of Attorney document. If your business is a company, the document you need is a Corporate Power of Attorney; for sole traders, the document is a Power of Attorney. These documents outline who you appoint to make what decisions. You can also add very specific terms so that it’s clear that each person’s decision making authority only takes effect in the event that you are incapacitated. Your lawyer can help guide you to ensure this document fits your life and circumstances.
Larissa suggests to support your Power of Attorney document with a guidance letter to each person you appoint to give more specific instructions around the operational aspects of the business. This can be more readily updated as and when the business operations change without requiring a lawyer, and can be referred to in the power of attorney document.
Continue the conversation
It is also recommended continuing to have conversations with your appointed Power of Attorney so that they are familiar with any significant changes in the business and can confidently continue your plans if you are not available.
For more information
Each state and territory in Australia has its own requirements and laws regarding Powers of Attorney. You can find more information on australia.gov.au
Read Planning for time off for further tips on developing contingency plans to support your Power of Attorney.