DealLawyers.com Blog

September 18, 2009

Impact of New York’s New “Powers of Attorney” Law on M&A

Joel Greenberg of Kaye Scholer brings us the following analysis of New York’s new power of attorney law on deals:

September 1, 2009 was the effective date for a series of amendments to the New York General Obligations Law that impose requirements for powers of attorney executed within New York State by individuals. Powers of attorney executed by persons other than individuals or by individuals (including New York domiciliaries) in a jurisdiction other than New York in accordance with the laws of that jurisdiction are not subject to these requirements.

On its face, the legislation appears to apply to powers of attorney embodied in other documents often used for M&A and other commercial transactions, such as shareholder representative provisions in acquisition agreements, shareholder lockup agreements and security agreements.

The operative provision provides in relevant part:

Section 5-1501B. Creation of a valid power of attorney; when effective.

1. To be valid, a statutory short form power of attorney, or a non-statutory power of attorney, executed in this state by an individual, must:

(a) Be typed or printed using letters which are legible or of clear type no less than twelve point in size, or, if in writing, a reasonable equivalent thereof.
(b) Be signed and dated by a principal with capacity, with the signature of the principal duly acknowledged in the manner prescribed for the acknowledgement of a conveyance of real property.
(c) Be signed and dated by any agent acting on behalf of the principal with the signature of the agent duly acknowledged in the manner prescribed for the acknowledgement of a conveyance of real property…
(d) Contain the exact wording of the:
(1) “Caution to the Principal” in paragraph (a) of subdivision one of section 5-1513 of this title ; and
(2) “Important Information for the Agent” in paragraph (n) of subdivision one of section 5-1513 of this title.

The legislation is not limited to New York domiciliaries or to documents governed by New York law; it purports to apply whenever a power of attorney is executed within New York State by an individual. In situations where some of the parties are individuals and there is a possibility that there may be documents executed within New York State, one solution may be to excise the provisions constituting a power of attorney from the principal deal documents and to include them in a separate document that conforms to the requirements of the legislation.

This approach would permit the more formal process of execution required by the legislation (i.e., acknowledgment before a notary public) to be accomplished before the remaining deal documents are complete and should have the additional benefit of confining any issues as to validity based on alleged non-compliance to the power of attorney.

This does not purport to be a complete summary of the legislation or to address all of the issues that it raises. The legislation is new and there is little or no secondary guidance to its potential application.

This does not purport to be a complete summary of the legislation or to address all of the issues that it raises. The legislation is new and there is little or no secondary guidance to its potential application.

On TheCorporateCounsel.net Blog today, I blogged about the impact of this new NY law on the federal securities laws.