Are you sure that your power of attorney is valid?

01 Apr 2021

There are many instances where companies require the assistance of a representative to represent the company in its dealings. This is especially relevant in light of the travel bans imposed by Governments due to the COVID 19 pandemic. In these instances, a power of attorney (“POA”) can be beneficial.

The POA is a document that sets out the scope of the agent’s authority to act on the principal’s behalf. For example, a company (the “Principal”) may authorise an employee or a professional advisor (the “Agent”) to act on its behalf to either perform various acts, or one specific act, on behalf of the Principal.

By virtue of signing a POA, all acts which are performed by the Agent within its mandate are regarded as the acts of the Principal. Therefore, a valid POA communicates to third parties that the Principal is bound by the acts of the Agent.

Requirements

Generally, there are no formalities for POAs and they may be given orally or in writing. However, if the act which the Principal requires the Agent to perform has certain prescribed formalities, then the POA will need to comply with the same formalities.

For example, the Alienation of Land Act 68 of 1981 provides that no disposal of land will be of any force or effect unless it is in writing and signed by the parties thereto or by their Agents on their written authority. In such instance, if the POA does not comply with the formalities (i.e. the Agent only has the Principal’s oral authority), any offer to purchase signed by the Agent will be invalid.

Although not a strict legal requirement, it is best practice to have a POA signed by two witnesses. Other than the compliance with any formalities prescribed by the legislature, a valid POA must be signed on behalf of the Principal by a person who has the necessary authority. Therefore, the signatory of a POA (such as a director of a company) must be authorised by the board of directors to execute the POA on the company’s behalf.

Effects of an invalid POA

Where a POA is invalid, any act performed by the Agent on the Principal’s behalf will be null and void. Furthermore, in certain instances the Agent can be held personally liable for his or her acts.

Therefore, it is of utmost importance that all formalities in drafting and executing a POA are adhered to.

Written by: Selloane Seliane

See also:

• On the right side of repudiation
• 12 ways digital signatures can aid businesses working remotely
• Be careful when contracting with a trust
• There is no such thing as a standard lease!

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)