POWERS OF ATTORNEY - CURRENT ISSUES

ADRIAN GREEN, Senior Associate
T: +61 3 9609 1597
E: amgreen@rk.com.au 

In this article:

·                      We provide a reminder of the “new form” Enduring Powers of Attorney (Financial) and highlight some issues relating to powers of attorney and companies;

·                       “donor” is used to describe the person appointing an attorney; and

·                       “attorney” is used to describe the person appointed to act on behalf of the donor.

Introduction

Individuals have been able to execute Enduring Powers of Attorney (Financial) in Victoria for many years, but recent amendments to the Instruments Act are often overlooked. 

For a director of a company or for a company itself, separate consideration needs to be given to appointing another person or entity to act in the director’s absence or on behalf of the company.

In all cases careful thought needs to be given to the choice and appointment of an attorney, and strict legal requirements must be met for that appointment to be valid.

Enduring Powers of Attorney (Financial) - 2004 changes

With effect from 1 April 2004 the Instruments Act 1958 (Vic) (“Act”) was amended to require all new Enduring Powers of Attorney (Financial) executed after that date to:

·                          specify whether any conditions, limitations or instructions apply to the tasks the attorney is authorised to undertake for the donor;

·                          include a certificate of witnesses by which both witnesses confirm that the donor has signed the document freely and voluntarily in their presence and that the donor, at the time of signing, appeared to have the capacity necessary to make the Enduring Power of Attorney;

·                          have as one of the witnesses a person authorised to witness statutory declarations in Victoria; and

·                          include a statement of acceptance, signed by each appointed attorney, by which the attorney undertakes or promises to:

·                         exercise the powers conferred with reasonable diligence to protect the interests of the donor; and

·                         avoid acting where there is any conflict of interest between the interests of the donor and the attorney’s interests; and

·                         exercise the powers conferred in accordance with the provisions of Part XIA of the Act.

The appointment of the attorney only becomes effective when the appointed attorney has signed the Statement of Acceptance part of the document.

Any Enduring Powers of Attorney (Financial) validly executed before 1 April 2004, remain in force and effect.

If drafted appropriately, the new form of Enduring Power of Attorney (Financial) also permits the appointment of the attorney to take effect in the future (rather than immediately), upon a specified date or the happening of a particular event. 

New form Enduring Powers of Attorney (Financial) - problems encountered

Particularly in property transactions we are seeing Enduring Powers of Attorney (Financial) presented  that do not comply with the requirements set out above.  For example, other parties are providing Enduring Powers of Attorney (Financial) executed after 1 April 2004 which:

·                          do not contain the required certificate of witnesses; and/or

·                          do not contain the required statement of acceptance, signed by each attorney.

Personal offices cannot be delegated

An Enduring Power of Attorney (Financial) does not empower the appointed attorney to take on any personal office held by the donor.  In general terms personal offices such as attorney, director or trustee cannot be delegated to another person.

For example:

·                          if the donor is a company director or a trustee of a trust, an Enduring Power of Attorney (Financial) executed by the donor does not empower the appointed attorney to act as director or trustee on behalf of the donor. 

Note, however, that the Trustee Act 1958 (Vic) permits a trustee to appoint an attorney, but the attorney trustee can only act while the donor trustee is outside Victoria;

·                          if Bernadette appoints Michael as her attorney by an Enduring Power of Attorney (Financial), Michael cannot appoint another person to act as Bernadette’s attorney.

Companies and Powers of Attorney

We are often asked:

·                          can a company with a sole director appoint another person to act in the place of that sole director; for example, while the sole director is overseas?

·                          can the company itself appoint a person or entity to act on its behalf?

As mentioned above, a company director cannot delegate to another person the office of director.  The company’s constitution determines whether the company can:

·                          appoint another person as an “alternate director”, to take the place of an absent director in administering the affairs of the company; and/or

·                          appoint another person or another entity as “attorney” for the company itself.

Comment

We trust that this article assists clients in checking their existing Enduring Power of Attorney (Financial) arrangements, and also in better understanding the “new form” Enduring Power of Attorney (Financial) that has been in place in Victoria since 1 April 2004.

If you require assistance regarding Powers of Attorney and associated issues, please contact us.