In light of COVID-19, the practicalities of executing documents remotely have come to the fore. Powers of attorney allow a company to appoint an individual to execute documents on its behalf. This article provides an overview of the use of ordinary powers of attorney in a commercial context.
What is an ordinary power of attorney?
An ordinary power of attorney (a "PoA") is a formal appointment by one party (the "Principal") in favour of another party (the "Attorney"), giving the Attorney the power to act on the Principal's behalf.
What can we use it for?
In a commercial context, PoAs are most often used by a Principal (an individual or a company) to authorise the Attorney to execute documents relating to a specific transaction. The PoA may specify precisely which documents the Attorney is authorised to execute, or it can give a general power to execute anything required in relation to a transaction or indeed generally. For example, a company could give a PoA to its lawyer to execute documents on its behalf.
What are the requirements for a company?
A PoA must be executed by deed. For a company, this means that either (i) one director and a witness, (ii) two directors, or (iii) one director and the company secretary, must be in a position to execute the PoA.
The company's constitution should be reviewed to ensure that it is able to give a PoA. Entry into the PoA should be properly considered, approved and minuted at board level in the usual way. The PoA should then be executed as a deed on behalf of the company in accordance with the company's constitution and the provisions of the Companies Act 2006.
What are the limitations?
A director cannot delegate his or her responsibilities to act as a director, or to attend board meetings, to an Attorney. Instead, a director should consider appointing an alternate director, again subject the company's constitution.
Similarly, an individual director cannot appoint an Attorney to execute on behalf of a company in his/her place. Instead, the Principal must be the company itself.
How can Gowling WLG help?
Please do contact us if you are considering how best to ensure that your company can continue to execute important documents at this difficult time and, in particular, if you would like to discuss appointing a third party as attorney to execute documents on the company's behalf.
Can we use electronic signatures?
In many circumstances, it may be appropriate for documents to be executed electronically. For more information on e-signatures, please refer to:
Electronic signatures are valid: So what's the catch on finance transactions?
Understanding electronic signatures