Last year, New York State enacted significant amendments to Title 15 of Article 5 of the New York General Obligations Law governing powers of attorney executed by individuals in New York State, which became effective September 1, 2009. The amendments, which, among other changes, imposed new power of attorney execution and disclosure requirements, were adopted by the legislature largely to address perceived abuses in certain elder care related matters. Nevertheless, because the 2009 statute was ambiguous and could be read broadly, Davis Polk and other law firms recommended in certain cases that powers of attorney executed by individuals participating in corporate transactions conform to the requirements of the statute.
On Friday August 13, Governor David A. Paterson signed into law corrective amendments to the 2009 statute that clarify various ambiguities in the law, including a new provision (GOL § 5-1501C) specifying that the requirements imposed in the 2009 statute do not apply to "powers of attorney given primarily for a business or commercial purpose". The effective date of the revised provisions is September 12, 2010 (30 days from August 13), and, once effective, the provisions will apply retroactively to September 1, 2009 (except that powers of attorney validly executed under prior law will remain valid).
Once the revised provisions become effective on September 12, 2010, participants in most corporate transactions will be explicitly exempt from the specific disclosure and execution requirements imposed by the 2009 statute. Among the types of powers of attorney specifically excluded from the reach of the statute as a result of the corrective amendments are:
- powers of attorney given to or for the benefit of a creditor in connection with a loan or other credit transaction;
- powers to facilitate transfers of securities and other property (which would include stock and bond powers);
- proxies or other delegations to exercise voting rights or management rights with respect to an entity;
- powers created on forms prescribed by government agencies;
- powers authorizing a third party to prepare, execute, deliver, submit and/or file a document or instrument with a government agency (which would include powers of attorney giving authority to file SEC forms);
- powers authorizing financial institutions and their employees to act with respect to a principal's account;
- powers given by individuals who are or are seeking to become officers, shareholders, employees, partners, members, or managers of entities in their capacities as such (which, together with other categories listed in Section 5-1501C, would include powers of attorney given in hedge fund and private equity subscription and transfer documents);
- powers contained in partnership agreements, LLC operating agreements, declarations of trust and condominium offering plans and bylaws (which would include powers of attorney contained in hedge fund and private equity fund LLC operating agreements and partnership agreements);
- powers given to condominium managing agents;
- powers given to licensed real estate brokers in connection with certain real estate matters;
- powers authorizing acceptance of service of process; and
- powers created pursuant to another statute that specifically contemplates creation of such powers (e.g., powers to make decisions regarding health care or to dispose of remains).
Powers of attorney executed by individuals that continue to be subject to the statute (e.g., powers of attorney commonly executed by individuals for general financial and estate planning purposes) must continue to comply with the specific execution and disclosure requirements set forth in Section 5-1501B of the New York General Obligations Law.
A copy of the corrective amendments signed by Governor Paterson is available here.