Business Succession – Company Power of Attorney
A company’s succession plan should include a company power of attorney (CPOA).
As a director cannot appoint an attorney to act as a director in their place, if a director is absent or unable to act for some reason the company may be paralyzed.
To avoid such a vacuum, a CPOA will be required.
Sole Director Companies
Under the Corporations Act 2001, on the death or incapacity of the sole director of a company, their legal personal representative (LPR) can step in. However, the appointment of the LPR may take some time. Having a COPA will allow for the immediate appointment of an attorney until the LPR has been appointed.
Where a director has made a valid will, it is necessary to wait until probate has been obtained before the LPR can act. This may take some months especially if the affairs of the deceased director are untidy, complicated or if the will is challenged.
If a director dies without a will, the Public Trustee might be appointed to the role of LPR. This will probably take some months.
If the director has a mental incapacity and is accordingly unable to act, the COPA will again come to the rescue allowing another person to fill the temporary vacuum.
In professions where a licence is required to be held to carry on the business, the lack of a COPA appointing a duly qualified professional could shut down the business. This could occur in a medical or dental practice, a real estate agency or construction company as in all these cases personal qualifications/registrations are required for the business to be able to trade. That appointment may allow for the orderly sale and liquidation of the business rather than its immediate closure.
Drafting of COPA’s
Regardless of how many directors a company has, an appointment under a COPA will either be for a specific purpose or expressed in more general terms.
For example, a COPA may be for the execution of a specific document; or alternatively it may contain very specific powers such as may be required if the company needs to deal with banks etc.
Whether a general or specific purpose COPA is required, it is highly recommended that the company get professional legal advice to draft the document.
The COPA is a part of prudent risk management and succession planning and it is important for the directors of all companies to implement what they can to manage the event of a directors’ ill health or death.
This article is not to be relied upon as a substitute for legal advice. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact us.