Estate Planning – If You Have A Company Or Businesses
by Caldwell Martin Cox | 13 02, 2023 | Latest News
People often think of a Will, Power of Attorney and Enduring Guardian documents to plan for how their personal affairs are going to operate if they were to fall ill or pass away. What many business owners and/or company Directors do not consider is how their business or company is going to continue to operate if they are unable to act in the role as the business owner or director.
A Power of Attorney will allow you to appoint someone to manage your personal financial and legal affairs which will also include your business. However, if you have a ‘Proprietary Limited’ company then the personal Power of Attorney will only allow the person you have appointed to act on your behalf as a Shareholder and not as a Director (unless the Constitution specifically allows for this). This is an important consideration if you have a company because, if you were incapacitated and unable to act as a Director, then it is the Shareholders, depending on the terms of the Constitution, which can then vote in a new Director. This may cause a significant shift in the control of the company.
If you were to pass away and you owned a business then your share of that business would pass under your Will. However, if that business is a partnership then it is always important to review the terms of the Partnership Agreement, if there is one, to determine how that partnership is to continue or be distributed upon the death of a partner. Sometimes partners contribute in different ways to the setting up and running of the partnership and so it is important to have it properly documented in a Partnership Agreement so there are no questions or uncertainties if issues or death were to occur.
If you were to pass away and you have shares in a ‘Proprietary Limited’ company then those shares will pass under your Will. It is important to remember that a company is it its own legal entity and so, the assets owned by the company cannot pass by your personal Will. This means, for example, the if company owns real estate, the property itself does not pass to the beneficiaries in your Will. It is important to look at what assets the company owns and what assets you own in your own personal capacity as they may not be dealt with as you originally thought.
To solve some of these issues a proper estate plan can be developed which can include a Corporate Power of Attorney (CPOA). This allows the company, as its own legal entity, to authorise and appoint named persons to do particular acts or things on behalf of the company (legal and financial matters) without the signature of all Directors.
The only legal criteria for a CPOA is that the person appointed as Attorney is over 18 years of age. As with a personal Power of Attorney, the attorney should be someone who is trustworthy and competent to undertake their duties. The CPOA can appoint a person as the attorney if the Director is unavailable, incapacitated, passes away or the Director wishes to delegate more minor tasks. The CPOA can be for limited purposes or a limited time and the Attorney can be an individual or another company.
If you wish to discuss your particular circumstances please contact our Estate Planning Team.