A Power of Attorney is a legal document that gives someone power of attorney to act on behalf of the company. Typically, the instrument of attorney carefully details the transactions and acts for which the person is being granted power of attorney, rather than providing a general mandate that would allow the agent to act with complete freedom.
A power of attorney gives legal powers to a person acting as an agent. For a business, 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 number of other activities to keep the business going. For security reasons, a POA document should strictly restrict the agent's activities or access to specific accounts.
Powers of attorney can be exercised in the ordinary course of business or only in certain circumstances - for example, when the business owner is incapacitated or does not have access to 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.
