A durable power of attorney is quite handy in enabling a person to manage the principal's estate in the event of the principal's incapacity without the need for the commencement of a cumbersome court supervised guardianship. Most states also permit the principal to nominate a guardian for his or her estate in his or her durable power of attorney, if the need for such a guardian should arise, such as the named attorney dying or becoming incompetent. This designation could help avoid uncomfortable situations where the need for a guardianship does arise and several family members battle for the right to be guardian.
A durable power of attorney can be quite broad and extend to a wide range of subjects. Each state has its own statutory regime relating to the form, content and effectiveness of a power of attorney and state rules are generally strongly influenced by the Uniform Power of Attorney Act, which was last updated in 2006 and replaced in its entirety the provisions of the then-current version of the Uniform Durable Power of Attorney Act.
When drafting a comprehensive form of power of attorney, a good starting point is the state-specific version of the optional form of power of attorney appearing in Article 3 of the Uniform Power of Attorney Act, which is a document designed for use by lawyers as well as lay persons and which was deliberately drafted using plain language instructions to principals and agents. Among other things, the form includes step-by-step prompts for designation of the agent and successor agents and grant of general and specific authority, and the Uniform Power of Attorney Act also includes default rules that should be understood before finalizing the content of a power of attorney. In addition, counsel may recommend and draft powers of attorney for clients that are focused on specific activities relevant to the management of the client’s assets as part of the estate planning process. Examples include a power of attorney for management and conduct of business, a power of attorney to manage real property and a power of attorney to convey real property.
Westlaw Next subscribers can learn more about drafting and using durable powers of attorney in Chapter 20 of Business Transactions Solution (Estate Planning).
In our last post we mentioned that entrepreneurs must recognize and overcome a variety of challenges in order to achieve their growth-oriented objectives and that researchers had neatly bundled those challenges into descriptive categories such as resource acquisition and allocation, work flow, human relations, technical mastery, market strategy, public relations and achieving and maintaining financial viability.
While in practice it is difficult to draw lines between each of these categories they do provide a starting point for analyzing the needs of a new business and communicating a story to potential investors. For example, entrepreneurs need to be able to explain to investors what will be needed in terms of capital, human resources, assets and information in order for the business to be successfully launched and operated. While presumably investors are being contacted to address the capital requirements of the business the money won’t be forthcoming unless the investors are satisfied about the entrepreneur’s plans for acquiring the right people and technology and are convinced that the entrepreneur has the skills necessary to deploy and manage the human and technological resources so that milestones in the business plan can be achieved on a timely basis. Entrepreneurs often lack the details that investors require with respect to how the money will be spent and have difficulty explaining to investors how they intend to organize work activities, motivate their employees and achieve the level of technical mastery necessary to create high quality products and services.
In order to avoid problems, entrepreneurs need to go beyond head count projections and be prepared to show investors how the new company's critical first product development project will be managed. While sophisticated investors will understand that things don't always go as planned, they will be interested in how the entrepreneur approaches and explains the development process and will want to understand the key assumptions that the entrepreneur is making and how they are impacting the timetables and budgets in the new company's business plan.
The power to elect the board of directors is held by the shareholders, and the power to elect all or a majority of the directors is held by those shareholders who own a majority of the outstanding stock of the corporation. Under certain circumstances, the shareholders may wish to allocate voting rights in some manner other than one based upon the ownership of shares. For example, special arrangements might be used in the following instances: shareholders in a closely held corporation may want to ensure that they will serve on the board of directors; a shareholder may wish to reduce his or her ownership interest in the corporation for estate planning purposes while retaining the voting control, at least while the shareholder remains actively involved in the management of the business; and a minority shareholder may be unwilling to invest needed capital without assurances that he or she will have some ability to participate on the board of directors.
Voting arrangements may take a variety of forms, including voting trusts, voting agreements or pooling agreements, and irrevocable proxies. For example, a corporation with two or three shareholders may have a shareholders’ agreement that ensures that shareholders’ actions may not be taken without the consent of the consent of both shareholders, when there are two shareholders, or both of the main shareholders, when there are three shareholders. See Specialty Form at § 11:151.30 of Business Transactions Solution on Westlaw Next. Another variant is a shareholders’ agreement that provides that actions of the board and shareholders will not be effective unless they are approved by one of the shareholders designated as the managing shareholder. See Specialty Form at § 11:151.70 of Business Transactions Solution on Westlaw Next.
Several researchers have carefully studied the progress of firms that appear to have the potential for rapid growth—emerging companies—in an attempt to identify some of the specific challenges that those firms and their managers can expect to encounter and the strategies that are most likely to be successful in overcoming those challenges. Some of the challenges are primarily related to the personal situations of the founders and the other members of the senior management team such as the lack of adequate management time, inadequacies in management skills, and conflicts within the management group. A shortage of necessary resources, such as qualified labor and/or suitable financing for expansion and credit facilities, was also often problematic. Interestingly, managers of growing firms apparently were relatively unconcerned about competition or lack of demand, both of which are consistently identified as significant challenges by managers of firms suffering through static or declining patterns. However, any new firm must anticipate that it will need to overcome certain barriers to entry and work hard to establish a reputation and track record.
Hendrickson and Psarouthakis identified the following eight issues that they believed must be managed in order for firms to realize growth-oriented objectives:
- Resource Acquisition: How does the firm acquire the necessary capital, human resources, assets, and information to launch and operate the business?
- Resource Allocation: How does the firm best deploy its accumulated resources?
- Work Flow: How are the required work activities of the business to be divided and organized to ensure efficiency and effective communications?
- Human Relations: How does the firm motivate and satisfy its human resources and encourage employees to understand and share a common vision?
- Technical Mastery: How does the firm achieve and maintain the necessary technical know-how to attain the highest levels of productivity and quality?
- Market Strategy: How does the firm identify its market niche and determine who its customers are and what they are looking for in making their purchasing decisions?
- Public Relations: What external groups, other than suppliers and customers, are important to the firm’s future and what strategies should be adopted for dealing with those groups?
- Financial Viability: Can the firm meet its financial obligations as they come due, grow its asset base, and operate profitably?
Achieving each of these objectives requires its own strategy and the day-to-day activities of managers and employees within the company can be understood as essential elements in pursuing each of those strategies. For example, recruitment of new employees is part of the company’s resource acquisition strategy and compensation and benefit planning is part of the company’s resource allocation strategy. The company’s work flow strategy will be impacted and defined by decisions on job design and descriptions. Communications with employees in the form of meetings, manuals, policies and newsletters are an integral part of the company’s human relations strategy. Training and development programs are important to several different issues. Training of sales and marketing personnel can advance market strategy, while technical training should improve the company’s technical mastery. In addition, training for managers should assist them in motivating employees (i.e., human relations) and smoothing work flow.