Effective September 1, 2009, the State of New York changed the requirements regarding Powers of Attorney executed by individuals in New York. As currently written, the changes affect Powers of Attorney obtained by corporations, trusts, joint ventures, partnerships, limited liability companies, and other types of entities from their corporate officers. It does not affect Powers of Attorney executed by entities such as corporations, trusts, joint ventures, partnerships or limited liability companies.
The amendments to the Power of Attorney law:
- Require specified language to any Power of Attorney be included for both the principal and agent.
- Require compliance for any Power of Attorney executed within the State of New York.
- Apply to Powers of Attorney contained within documents and agreements such as loan and financing agreements, limited liability operating agreements, fund operating agreements, subscription agreements and partnership agreements.
- Require that any Power of Attorney contain a notary acknowledgment.
- Impact the traditional form of Power of Attorney often contained in public company registration statements for director signatures.
The new law applies not only to stand-alone Powers of Attorney but also to Powers of Attorney included in other legal documents, such as financing and security agreements, partnership agreements and SEC filings such as registration statements. Further, the required changes to Powers of Attorney will be applicable in the private and registered fund context. Many fund operating, subscription, transfer and related documents include Powers of Attorney provisions, and the changes impact those documents.
The new requirements (set forth in General Obligations Law Section 5-1501B) do not make invalid Powers of Attorney issued prior to September 1, 2009 or Powers of Attorney executed outside of New York in compliance with the laws of the state in which they are executed. A Power of Attorney executed outside of the State of New York by a New York resident will be valid if it is executed in compliance with the jurisdiction in which it was executed.
The new law sets forth changes in language as well as format and creates a new short form statutory Power of Attorney, a copy of which is annexed. The new form requires that it be executed by both the principal and the agent, and the execution of a Power of Attorney will revoke all other Powers of Attorney previously executed. The short form is not a required form, but all Powers of Attorney must contain the exact wording of a cautionary statement to the principal1 and a notice to the agent2, as they appear in the new law.
The new law also requires Powers of Attorney to comply with certain other mechanical requirements to be valid:
- the Power of Attorney must be typed or printed using letters which are “legible” and of at least 12 point in size;
- the signatures of the principal and the agent must be notarized; and
- the Power of Attorney will not become effective until the agent executes the power.
Third parties must honor statutory short form Powers of Attorney unless they have reasonable cause not to, and the fact that the form does not accord with the third party’s form is presumptively unreasonable. The exclusive remedy for failure to do so is a special proceeding under General Obligations Law section 5-1510. Other forms of Powers of Attorney may be utilized under certain circumstances, but this new law will not require compliance with such powers by third parties.
As written, the new law does not include any exemption for individuals executing a Power of Attorney in connection with a statutory filing, such as when directors of a publicly held company execute a Power of Attorney in a registration statement being filed with the SEC. Issuers with New York based individuals may want to consider removing from pending or future filings the Power of Attorney language which may have been sufficient in the past, and instead use an alternate form for those New York based individuals who will be signing the filing. The separate Power of Attorney should be filed as an exhibit to the filing.