A Power of Attorney is a legal document that gives someone authority to act on behalf of the company. Typically, the power of attorney document carefully details the transactions and processes for which the individual is being granted power of attorney, rather than providing a general mandate that would allow the power of attorney to act with complete freedom.

A power of attorney gives legal authority to a person acting as an agent. For a company, this authority may include the ability to access financial accounts, sell or place new orders in securities, and write checks, although the agent may also perform a variety of other activities to keep the business running. For security reasons, a POA document should strictly restrict the agent's activities or access to specific accounts.

Powers of attorney can be used effectively in the normal course of business or only in certain circumstances - such as when the business owner is unable to make decisions or has no access to the business accounts.

Pros and cons of POA authorization
The key benefit of having a business power of attorney is that you have the security of a contingency plan in the event the business owner or other authorized representative is unable to perform their duties. Authorizing a representative to act on their behalf prepares the company for unexpected situations and allows important business decisions to be made in a timely manner. If the owner of the company has not granted anyone a legal power of attorney, there is always a risk that at some point he will not be able to make important business decisions or essential transactions, which can lead to great damage to the company and its reputation. Not having an authorized representative can result in not paying salaries on time, not servicing business loans or mortgages, not paying third-party vendors, and losing potential contracts.

The benefit of being able to authorize someone to act on behalf of the account holder comes with the peace of mind that you can trust the authorized agent with access to your business account. Therefore, you are strongly advised to think carefully before granting someone a POA and giving him or her access to a bank account and the ability to make important business decisions. The person you appoint as a representative has uncontrolled access to Company funds, which could potentially increase security risks if the appointee is acting in interests other than those of the Company.

Safety Risks & Liability
In general, an authorized representative is expected to make decisions that are in the best interests of the account holder, even if those decisions are not those that the authorized representative would make in person. It is therefore important to discuss all aspects and obligations of the POA with this person.

To mitigate 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 running your business at a time when you will not be able to pay close attention to his or her decisions. Finally, a power of attorney given to the wrong person can lead to misuse of the company's funds or its access to credit, for example, if that person makes bad investments, goes into debt on your behalf, or fails to pay bills on time.

To avoid this type of scenario, it is extremely important to state any powers that you wish to give your representative and to clearly state the powers that your representative will not have. In addition, you can also include a provision in the power of attorney that allows another person to review your proxy and, if suspected, to revoke the power of attorney.

When the agent exercises the POA, every decision or transaction he or she makes is treated as if it were made by the account holder personally. Therefore, it is recommended that you involve an attorney in the preparation of the Power of Attorney to ensure the document is tailored to the specific needs of the business, includes an appropriate level of authority and ensures the document clearly outlines any restrictions and approvals.

POA authorization as a tool for appointing nominees
If you are the owner of a company and wish to retain control of your company but for some reason wish to keep your interest in the company to yourself, you may appoint a nominee director. Typically, the nominee director will issue a Power of Attorney for you as the beneficiary of the company, giving you complete control over your company. In essence, the beneficiary retains the rights to the commercial bank accounts and shares, while the nominee director acts as the public administrator of the company. This can be a good way to protect your confidentiality. Click here to learn more about the nominee services we offer.