A business owner who is injured in an accident or suddenly falls ill may leave behind a paralyzed business: no one to sign salaries, pay suppliers or decide at a board meeting. A continuing power of attorney can help, but it must fit with the business documents.
What can the power of attorney cover?
- Running a sole proprietorship: accounts, suppliers, employees and tax authorities.
- Exercising a shareholder’s rights in a company: voting at meetings, appointing directors, receiving dividends.
- Decisions on selling the business or shares, if the grantor wishes to allow it.
An important distinction: the attorney acts on behalf of the grantor as a shareholder. The role of director or CEO is a personal office in the company, and filling it depends on the articles and company resolutions, not only on the power of attorney.
Coordinate with the articles and the founders’ agreement
The articles of association or the partners’ agreement may set what happens when a partner becomes incapacitated: a right of first refusal to buy his shares, a valuation mechanism, or restrictions on transferring rights. A power of attorney not coordinated with these documents may lead to disputes. If you are setting up a company, this is the time to address it in the founders’ agreement.
Who should run the business?
A spouse or child who is right for household matters is not always right for running a business. You can appoint a separate attorney for business matters, such as a partner, a finance manager or an experienced family member, and another attorney for everything else. See how to choose an attorney.
What else should you prepare?
- Bank signing rights for an additional person, already today, so the business does not stop in the first days.
- An organized list of accounts, system access (kept separately and securely), advisors and key suppliers.
- Advance directives on the future of the business: continue, sell or close. See advance directives.
Where do you go from here?
Every person and every family is different, so a good continuing power of attorney is built around the assets, the family relationships and the wishes of the person granting it. At Paz Israel & Co. Law Office we draft continuing powers of attorney and advance directives, and we also support families when the document comes into force. For more information see our continuing power of attorney page, or contact us to schedule a meeting.
This article provides general information, is correct as of the time of writing, and does not constitute legal advice or a substitute for reviewing your specific circumstances.