You’re a company director but need to go away for a couple of weeks when a board meeting is due. What do you do? Sign a power of attorney, fail to turn up?
Either of these could cause some serious problems for the director and the company itself – particularly if it means decisions and meetings are later found to be invalid. A director’s appointment is personal and his or her functions as a member of the board can only be discharged by the person holding that office – not an attorney. Accordingly the directors powers and general duties cannot be delegated unless there is a specific power in the company’s rules or constitution to either appoint an attorney or an alternate director.
If a director is aware they will not be capable of conduct during any given period, the best way to address this is by the appointment of an alternate director who can act on the director’s behalf in their absence. Again this can only be done if the company’s constitution allows for this. Even if this is allowed other steps will need to be taken to ensure the Corporations legislation is complied with.
Comparison of Risk
As an attorney effectively acts as the principal’s agent the director will remain liable for the attorney’s actions which may not be an ideal situation for the existing director. An alternate director however shall typically be deemed to be a director and shall alone be responsible for their own actions.
Unlike an attorney acting under a power of attorney an alternate director will incur personal responsibility. Further, as the alternate director is treated for all purposes as a director their appointment will need to be registered with the ASIC.
There are a number of distinctions to this general principal to keep in mind however including:
- the appointment of an attorney by a director is distinct from the company appointing an attorney to carry out tasks for and on behalf of the company in the company’s name. The latter is more commonplace and can be very useful for the administration and general conduct of the company’s affairs.
- A director may grant a power of attorney to execute specific documents on their behalf in their personal capacity. This may sound like the delegation of the directors personal duties which must be discharged by the director alone however it is quite different. As an example directors are required to take responsibility for the accuracy of documents submitted to the ASIC. It’s common for each of the directors to appoint an attorney (usually one director) to sign on behalf of each of the other directors. If the power being exercised is not the responsibility of the board, but is rather a personal responsibility of an individual director: the attorney will not be acting on behalf of the director in their capacity as a director, but as agent for the director in the director’s personal capacity.)
If you have any concerns in this area you should consult a solicitor to make sure a proper system is in place during a director’s absence.