There is a common misconception that in order to form/register a company in Latin America, you must be physically present at the time of the company incorporation. Processes such as filing documentation, registering with local authorities, preparing the company by-laws, etc can be complex and time-consuming. This is why effectively utilizing a power of attorney can be a powerful tool to expand your business.
A power of attorney (‘Poder’ in Spanish) is a useful tool that simplifies the company formation process, allowing a trusted local partner to complete the company formation on your behalf, without the need for you to be physically present in the country where the process will be taking place.
The explanation below will provide a snapshot of how a power of attorney can allow you to set-up a business in Latin America, allowing you to take full advantage of the benefits the region has to offer. At Biz Latin Hub, we can help you with this, as well as provide a whole array of back-office services to assist your business anywhere in Latin America and the Caribbean.
What is a Power of Attorney (POA) and when is it used?
A power of attorney (Poder) is a legal document granting an attorney, legal agent, or organization the right to manage legal affairs (often commercial) on the behalf of an individual or company. POAs are very common when commercial activities are being conducted outside of an individuals/company’s place of residence (i.e a company from the USA engaging in commercial operations in Latin America).
A common use of a POA is for the incorporation of a legal entity in Latin America; with the POA granting a local individual/company (usually a legal firm or attorney) the right to complete the company incorporation on behalf of the grantor.
*Please note that a POA / ‘Poder‘ is approved through a national notary, by apostille (assuming the country is within the Hague Convention) or through national legalization.
What are the different types of POA?
- General Power of Attorney
As the name states, this form of a POA grants the elected agent a broad scope to carry out processes on behalf of the client.
- Special Power of Attorney/Limited Power of Attorney
The special power of attorney grants the agent limited control of the grantor’s affairs, with the POA specifying which affairs the agent can control.
How is a POA created?
A POA can be created through an oral declaration at a court, or through a formal document. The latter is the most recommended way of creating a POA given most countries and their respective financial institutions require a physical, authenticated and notarized documentation to complete formal procedures.
In regards to the formation of a company/legal entity in Latin America, creating a POA will require the following steps:
- The grantor will provide information regarding their business needs and requirements to its local partner abroad (i.e the need for the local partner to complete the company incorporation process on behalf of the grantor)
- The local partner (legal firm, attorney etc) will draft the POA and send to the grantor
- The POA will need to be notarized and apostilled
- The POA will need to be physically mailed back the local partner
Once the completed documentation (the notarized and apostilled POA) has been received, the local partner can begin the company formation on behalf of the grantor.
Please note that the country where the apostille takes place must be part of the Hague Convention.
What are the benefits of a POA for doing business in Latin America?
Deciding who will be your agent is a crucial factor when it comes to POAs, given the grantor is trusting someone to perform legal procedures in their name.
A lack of knowledge on the local business environment can complicate the process of doing business in Latin America, for this reason, a POA can be a useful tool – allowing a trusted partner to complete business processes and registrations on your behalf, without the need for you to travel.
The use of POAs are especially beneficial for companies looking to establish operations abroad, yet don’t have the time or capacity to travel.
FAQs on power of attorney in Latin America
Yes, you are able to hire a POA in a foreign country while you, yourself, are a resident of a foreign country outside the country of interest.
There are two main types of power of attorney:
– General power of attorney
– Special power of attorney/Limited power of attorney
Both types can be utilized depending on what commercial activities and powers you are comfortable delegating.
Commonly, the grantor will provide information regarding their business needs and requirements to its local partner abroad. The local partner (legal firm, attorney etc) will draft the POA and send it to the grantor. This leads to the following:
– The POA will need to be notarized and apostilled
– The POA will need to be physically mailed back to the local partner
Granting a power of attorney to a local partner that you do not trust could potentially increase the risk associated with a power of attorney. Therefore, it is vital to select a partner you can depend on with a transparent relationship.
No, most countries in Latin America will require a local partner that is able to communicate and work with the appropriate authorities, which usually is not possible by a legal partner outside your target country.
Biz Latin Hub can help you understand power of attorney
At Biz Latin Hub, we have a multilingual team for legal, accounting, recruitment and company formation services, ready and waiting to support your business efforts in the Caribbean and Latin America.
Our broad range of services allow our clients to do business with the peace-of-mind that they have checked all the commercial boxes, and that they are compliant with all the relevant legislative and regulatory criteria.
To learn more about how we can assist you in doing business in Latin America, contact us.
Also, you can learn more about our team of professionals and how they are enabling commercial growth across Latin America.
