Tuesday, November 1, 2022

A great leap forward?** Attorneys acting as director

A recent post considered the broad limitations to an attorney's powers.

While a validly appointed financial attorney has extremely wide powers in relation to what they may do on behalf of the donor, one of the key specific restrictions relates to a donor's directorships.

A directorship is a personal role and cannot be delegated.

Arguably the leading case on this point is Mancini v Mancini [1999] NSWSC 799.

The key statement in that decision was as follows -
'The office of a director is a personal responsibility, and can only be discharged by the person who holds the office.

If there is any exception, it must be found in the constitution of the company and in some authorisation there found to act by an alternate or other substitute or delegate.

The office of a director is not a property right capable of being exercised by an attorney or other substitute or delegate of the person holding the office; many rights as shareholder can be distinguished in this respect because they are rights of property.'
It is important to understand from an estate planning perspective that there are three main potential work arounds in this area, namely -
  1. a company may grant an individual a power of attorney to act on behalf of the company;
  2. the company may appoint an alternative director; or
  3. if the director is personally a shareholder and has granted a personal enduring power of attorney, then the attorney may be able to exercise their powers via control of the shareholding to appoint a new director (including themselves).
As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Billy Bragg song 'Waiting for the great leap forward'.

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