In comparison to Australia, where Power of Attorneys ("POAs") (ironically referred to in some circles as a "licence to steal") are not an especially common instrument when doing business, Latin America cannot operate without POAs which are part of "la vida". In a direct business culture clash with Australia, parties entering into a contract in Latin America must have express and written authority to do so. The most common instrument of doing this is through the use of a POA. Whilst Board resolutions can be used as an alternative for some functions, this is less common. POAs are typically used for instructing professionals including lawyers, accountants, architects, engineers (although not doctors or veterinarians).
In Chile, all incorporated companies must have a Legal Representative ("LR") who must be a Chilean citizen. The LR is legally responsible for the company and rights of authority automatically vest with the LR when the company is incorporated. When a company is a subsidiary of an Australian company, it is common for the Australian company to give a POA to the Chilean company's General Manager/"Gerente General" or equivalent, to attend to day-to-day functions in its role for the business. Such functions include entering into employment contracts, leases of office space and/or buildings or business contracts as well as attending to the company's banking needs.
If an Australian company wishes to grant a POA to a person in Chile, that POA must be signed in front of a Notary Public in Australia, then legalised at the Chilean Consulate and/or authenticated by the Department of Foreign Affairs and Trade (depending on the Treaty with Australia regarding notaries). Once the original is sent to Chile, it then needs to get "locally" legalised and registered. A similar process applies to granting a POA in Argentina, Peru, Colombia and Mexico.
The wider the powers contained in the POA, the more practical it is. However, this has the drawback of being more dangerous. If the attorney is granted too much power, he/she can be a risk to the business, so the key is trust. Companies need to find the right balance between 'wide' and 'specific' powers. In some cases, Australian companies give very limited powers in POAs so the General Manager cannot do anything without the Australian parent company's approval. This obviously has negative practical impacts on running the business in Chile. Nevertheless, POAs are easy to revoke, so they are safe in that respect.
Practical tips on POAs:
1. Do a background search on whom you intend to provide a POA. This is inexpensive and there are companies in Australia such as Seraphim Risk Management from Melbourne that can attend to this;
2. work out exactly what the person (to whom the powers will be vested) will be doing and work from there. Work out limits. For instance, powers can be split in to matters such as dealing with employment contracts, banking, debt collecting, representation before public agencies and political authorities, mail, sales, business contracts and real estate. Similarly, each section can have a corresponding monetary limit; and
3. separate the role of the General Manager and Legal Representative and thus have a "check and balance" (we find in many cases clients innocently give one person both these functions and thus put all their eggs in one basket).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.