Businesses and foreign investors looking to enter the Latin American or Caribbean market for the first time are likely to need the services of an attorney of fact at some point in their incorporation or investment process.
What is an Attorney of Fact?
An ‘attorney of fact’ or ‘agent’ is a person who is authorized to act on behalf of another person, known as the principal, to perform business or other official transactions, according to the financial/investment website Investopedia. The principal usually designates someone as their attorney of fact by assigning them power of attorney (POA).
In essence, an attorney of fact is an individual who has been given power-of-attorney by a business or individual to act on their behalf in making legal or financial decisions. Another important aspect of this arrangement is that power of attorney can be given to people who are not lawyers, but we recommend that only experienced legal professionals be given power of attorney, to act as an attorney of fact.
When do I need these services?
Almost all Latin American and Caribbean jurisdictions require the appointment of a legal representative (who is a citizen of the particular country you’re entering) as part of the incorporation process. Attorneys of fact can act on behalf of the foreign business to perform various tasks, including:
- Collecting all application forms, licenses, bank records, and other documents required for the incorporation process
- Submitting the incorporation application/related documents to the necessary government authorities
- Assisting in renewal of incorporation licenses, etc.
- Opening corporate bank accounts on the company’s behalf
- Providing guidance on the country’s regulatory/compliance requirements
- Signing official documents on behalf of the company
It is important to note that while attorneys of fact can perform many of the same tasks that a local manager or director would do, attorneys of fact and local directors are not the same thing.
SEE ALSO: Minimum Statutory Requirements for a Company/Legal Entity in Latin America
What’s the difference between an attorney of fact and a local director?
An attorney of fact is (ideally) a lawyer who is empowered through a POA, whereas a legal representative or local director can be appointed according to a company’s bylaws (depending on the jurisdiction).
Revoking a person’s attorney-of-fact status requires the principal removing their POA in front of the relevant legal/government authorities, while doing the same for a legal representative/local director requires only the approval by a company’s board of directors.
Another main difference between the two aforementioned roles is that a local director or legal representative is more transparent, meaning they need to give status reports more frequently and require approval of his/her superiors to make major financial decisions. An attorney of fact, on the other hand, has more freedom to make financial or legal decisions on their own.
What are the advantages and disadvantages of an AOF?
What follows are a few things to consider before empowering someone to act as an attorney of fact.
- Attorneys of fact are convenient, as they can perform tasks such as handling an incorporation process in a Latin American or Caribbean jurisdiction without the need for the principal to be present
- Attorneys of fact are useful when the principal is unable to tend to their own affairs due to diminished physical or mental capacity
- The authority granted to an attorney of fact means that things get done faster than local directors, and are ideal for companies that need to incorporate in a jurisdiction as quickly as possible
- One major disadvantage of an attorney of fact is that they may act in ways or do things that the principal had not intended
- As there is no direct oversight of an attorney of fact, except by the principal, there is the potential that an unscrupulous individual may abuse their position to commit fraud
- Many third parties such as banks or other financial institution do not accept attorneys of fact without first verifying with the principal that they are indeed acting in the principal’s best interests.
Biz Latin Hub can help you with hiring an attorney of fact
At Biz Latin Hub, we provide integrated market entry and back-office services throughout Latin America and the Caribbean, with offices in Bogota and Cartagena, as well as over a dozen other major cities in the region. We also have trusted partners in many other markets.
Our unrivaled reach means we are ideally placed to support multi-jurisdiction market entries and cross border operations.
As well as knowledge about attorneys of fact, our portfolio of services includes hiring & PEO accounting & taxation, company formation, bank account opening, and corporate legal services.
Contact us today to find out more about how we can assist you in finding top talent, or otherwise do business in Latin America and the Caribbean.
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