September 08, 2017
Power of Attorney- The Detailed Explanation
BY : admin

Many of us would associate this term with negative meanings. It has been depicted in pop culture as a tool of ultimate power that causes people to lose their livelihood, their businesses, and basically leave them homeless. In reality, a power of attorney has the same power as any other legal document you bind yourself by. It is not an all pervasive perverse deed but a helpful tool. So what is a Power of Attorney?

In the technical legal terms, a Power of Attorney (POA) is a document which allows the “attorney-in-fact” i.e. the one who is on the receiving end, to make decisions for a Principal who is incapacitated i.e not able to make decisions. In the business world, such POAs are a highly essential and time saving tool for any firm, Multinational Corporation or even small businesses.

Let me paint you a mental picture to elaborate this further. In any organization, the CEO or the General Managers are concerned with the bigger picture. Getting in more revenue, dealing with legal matters, and enabling a functional workplace are some of their jobs. Thus, they have managers appointed in every department so that the day-to-day affairs of the respective department are handled by these managers. They have the power to make small decisions but still, for the bigger ones like entering into Agreements, disbursing salaries, forming alliances, etc. are not powers that are inherently vested in the Managers. These still lie with the General Manager. However, it is impractical, inconvenient, and time-consuming for the Managers to run back and forth asking for permission to do the littlest of things. Moreover, it defeats the purpose of delegation of power if the GM is to be taking care of the matters at the end of the day. Thus, the legal team at workplaces draft POAs which clearly mark out the dealings a Manager is authorized to carry on. It is delegation of power that flows directly from the company to the GM to the Managers. It not only ensures that the Managers take active interest and participation in the functioning of the company but also holds them accountable for any mishaps that occur under their supervision. Of course the vicarious liability will still lie on the company but at least they know who to reprimand in case of trouble.

Thus, a Power of Attorney is simply a tool which allows the agent to act on behalf of the principal in good faith. The extent of the powers delegated, the remuneration, if any, which needs to be given to the agent for his duties, is all a matter of objective negotiation and can be dealt with differently from a person to person basis.

Types of Power of Attorneys

On the grass-root level, there are three main types of POAs that we need to understand and work with. These are:

1. Special Power of Attorney

​As the name suggests, this type of POA is only required for specific and limited purposes. For example, the POA is valid only while it only entitles the agent to do certain and very specific acts on behalf of the principal anything beyond these special tasks is beyond their authority.

2. General Power of Attorney

This is the expanded and all-pervasive version of the special POA. Here, the agent has the power to make all the decisions relating to business and at times, even personal matters. Needless to say, such a POA should be made only for someone who is entirely trustworthy.

3. Temporary Power of Attorney

This is the where the POA is valid for a limited time-frame depending on the reason it is entered into. One way this can be used is when it is drawn up while a certain project is being completed and upon completion of the same, it will be rendered void.

The pricing of registering each such POA is different depending on the purpose it is being drawn as well. When it is made for general purposes and the agent is a near relative and there is no consideration involved in the POA, the the nominal stamp duty of Rs. 500 + Rs. 100 has to be paid. If there is some property or consideration involved, then the stamp duty will be payable as per the market value of the property or the amount of the consideration specified, whichever of the two is higher. The Stamp Duty paid for registering a Special POA is Rs. 100. It needs to be noted that registration of POA is optional in India and thus has to be done as per the principal deems fit. Thus, it is not a compulsion at all but a matter of choice if one wants to take the official legal route. Of course the validity and value of a registered POA is much higher than the non-registered counterpart but it also depends on the tasks being assigned.