NY State Assembly Passes Bill to Amend Power of Attorney Law | Practical Law

NY State Assembly Passes Bill to Amend Power of Attorney Law | Practical Law

An update on the passage of a bill to clarify the reach of New York's power of attorney law.

NY State Assembly Passes Bill to Amend Power of Attorney Law

Practical Law Legal Update 4-502-0147 (Approx. 3 pages)

NY State Assembly Passes Bill to Amend Power of Attorney Law

by PLC Corporate & Securities and PLC Finance
Published on 13 Apr 2010 • New York
An update on the passage of a bill to clarify the reach of New York's power of attorney law.
On April 8, 2010, the New York State Assembly passed a bill which, if approved by the Senate and signed into law, would clarify changes made to New York's power of attorney laws in September 2009 (see Title 15 of Article 5 of New York's General Obligations Law).
In September 2009, Title 15 of Article 5 was amended to address a concern that individuals executing a power of attorney may not understand the full consequences of giving the power and may be subject to abuse (the September 2009 Amendments). The September 2009 Amendments imposed new requirements to create a valid power of attorney, including:
  • Inclusion of legends relating to the potential scope of authority that may be granted to the agent and fiduciary duties of the agent owed to the principal.
  • Manual signatures of the principal and agent.
  • Notarization of the manual signatures.
The impact of the September 2009 amendments on business and commercial transactions is not clear and has caused concern among many practitioners (see Legal Update, 51 Law Firms Issue Interpretative Paper on NY's New Power of Attorney Law).
The bill, if passed, will allay many of these concerns. It would add a new section, 5-1501(C), which lists the types of transactions that the September 2009 Amendments would not apply to, including (among others):
  • Powers given primarily for a business or a commercial purpose.
  • Powers given to facilitate transfer of stocks, bond or assets.
  • Powers given to creditors in connection with a loan.
  • Powers used to exercise voting or management rights within an entity.
  • Powers given by individuals who are or are seeking to become directors or officers, managers, employees or equity owners of an entity in their capacity in any of these positions.
  • Powers authorizing a financial institution to take action relating to an account in which it holds cash, securities or other financial assets on behalf of the person giving the power.