Power of attorney authorisation
A power of attorney is a legal document that gives someone authorisation to act on behalf of the business. Typically, the authorisation document carefully details the transactions and processes for which the person is being granted power of attorney, rather than giving a general mandate that would allow the agent to act completely freely.
A power of attorney provides legal authority for a person acting as an agent. For a business, this authority can encompass the ability to access financial accounts, sell securities or place new orders and write cheques, although the agent may also perform a range of other activities to keep the business running. For security reasons, a POA document should strictly limit the agent's activities or access to specific accounts.
Powers of attorney can be used effectively in the normal course of business, or only under certain circumstances - for example, when the owner of the business is incapable of making decisions or unable to access the business accounts.
Advantages & disadvantages of POA authorisation
The main advantage of a power of attorney for a business bank account is that it gives you the security of a back-up plan in case the owner of the business or other authorised persons are unable to fulfil their tasks. Authorising an agent to act on its behalf prepares the business for any unexpected situation and enables essential business decisions to be made in a timely manner. If the owner of the business has not granted legal authorisation to anyone, there is always a risk that at some point he or she will not be able to make important business decisions or carry out essential transactions, which can lead to huge damage to the business and its reputation. Not having an appointed authorised agent can result in salaries not being paid on time, business loans or mortgages not being serviced, third-party suppliers not being paid and potential contracts being lost.
The advantage of being able to authorise someone to act on behalf of the account holder goes hand in hand with the need to be certain you can trust the appointed agent with access to your business account. Therefore, you would be firmly advised to think carefully before granting someone a POA and providing him or her with bank account access and the ability to make important business decisions. The person you designate as the agent will have unmonitored access to the company's funds, which could potentially increase security risks if the appointed person acts in any interests other than those of the business.
Security risks & liability
Generally, someone who is granted power of attorney is expected to make decisions according to the best interests of account holder, even if those decisions are not those that the agent would make personally. Therefore, it is important to discuss all aspects and liabilities of the POA with that individual.
In order to diminish the possible security risks, you need to understand who you can trust with access to the business account and, ultimately, the business itself. The agent will most likely be managing your business at a time when you are not able to pay close attention to his or her decisions. Eventually, a power of attorney given to the wrong person can result in misuse of the company's money or its access to credit, if, for example, that person makes poor investments, incurs debts in your name or fails to pay invoices in a timely manner.
In order to avoid this kind of scenario, it is extremely important to specify all of the powers you want to appoint to your agent as well as clearly expressing those powers that your agent will not have. In addition, you can also include a provision in the power of attorney allowing for another person to check up on your agent and, in case of any suspicious activity, to revoke the authorisation.
When the agent exercises the POA, any decision or transaction he or she makes is treated as though it was made by the account holder personally. Therefore, it is recommended that you involve a solicitor in drafting the power of attorney to make sure that the document is tailored to the specific needs of the business, includes an appropriate scope of powers and ensures that the document clearly outlines all restrictions and permissions.
POA authorisation as a tool for appointing nominees
If you are the owner of a business and you want to keep control over your company, but for any reason you wish to keep your interest in the business to yourself, you can appoint a nominee director. Typically, the nominee director issues a power of attorney for you as the beneficiary of the company, so you can remain in complete control over your business. Essentially, the beneficiary retains the rights over the business bank accounts and shares, while the nominee director acts as the company's public administrator. This can be a good way to protect your confidentiality. Click here to read more about the nominee services we offer.
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