Combine chocolate and cream in a heavy 2-quart saucepan over medium heat. Cook, stirring often, until chocolate has melted and mixture is smooth and creamy. Remove from heat and set aside.
In bowl of electric mixer, combine the softened butter and powdered sugar. Beat low speed until sugar is blended, then increase speed to medium-high. Beat until mixture is very fluffy, about 5 minutes, stopping to scrape down side of bowl once or twice.
Transfer sugar mixture to top of double boiler over simmering water. Cook, whisking often, until mixture is silky smooth, about 10 minutes. Whisk the melted chocolate into the sugar mixture. Continue to whisk until sauce is smooth and glossy. Add the sherry and whisk to blend. Refrigerate until ready to use. Reheat in top of double boiler over simmering water, or serve at room temperature.