If you’re a company Director, then you are likely to be signing documents on behalf of a company. The law sets out how this can be done validly so that both the company and the other party are bound by what is signed.
There are 2 main ways that a company can sign a contract:
- By its Directors; or
- By someone acting with the company’s authority and on behalf of the company.
It’s worth unpacking this because how a company signs an agreement affects what the other party can assume and therefore how the company is bound to the agreement.
Option 1: Signed by Directors
The clearest way that a company can sign an agreement is to be signed by:
(a) 2 directors of the company; or
(b) a director and a company secretary; or
(c) if a sole director—that director, where they are secretary or if there is no secretary.
When a document is signed in this way, the other party may assume that a document has been validly signed by the company. This assumption generally holds even if the director or secretary acts fraudulently, or forges a document, in connection with the dealings, unless the other party knew or suspected that the assumption was incorrect.
Option 2: Signed by someone representing the company
The law also allows signing by someone acting with the company’s express or implied authority and on behalf of the company. For example, this might be the CEO , or other person appointed under a company resolution.
When a document is signed in this way, the other party may assume that the person has been duly appointed; and has authority to exercise the powers and perform the duties. This assumption generally holds even if the representative acts fraudulently, or forges a document, in connection with the dealings, unless the other party knew or suspected that the assumption was incorrect.
What does this mean for my company?
If you or the other party to an agreement are companies, signing under Option 1 is generally the safest way and the less susceptible to being disputed.
A company signing by way of an authorized representative is allowed, but if you are a Director, you should still review the relevant agreement even if you don’t sign it.
Where the other party to an agreement is a company and it signs by way of an authorized representative, you are allowed to assume that they are authorized by the Company (unless you suspect otherwise), but you may want to confirm the basis on which that person is authorized, or insist that option 1 is used.