Company signing authority compared

Two questions: authority and form

A company acts only through people. Two separate questions follow. The first is whether the person had authority to bind the company. The second is whether the document was signed in the form the law requires. UK law answers the first in sections 40 and 43 of the Companies Act 2006 and the second in section 44 ^1,23.

Section 43 says a contract may be made by a company by writing under its common seal, or on behalf of a company by a person acting under its authority, express or implied ². Any formalities that apply to a contract made by an individual apply to a company contract too, except where a contrary intention appears ².

UK section 44: execution of documents

Under the law of England and Wales or Northern Ireland, section 44 sets out how a company executes a document ¹.

• By affixing its common seal ¹.
• By signature of two authorised signatories on behalf of the company ¹.
• By signature of a director in the presence of a witness who attests the signature ¹.
• Authorised signatories are every director and, in a private company with a secretary or in a public company, the secretary or any joint secretary ¹.
• A document signed this way and expressed to be executed by the company has the same effect as if executed under the common seal ¹.
• A person signing for more than one company must sign separately in each capacity ¹.

What an outsider may assume

In favour of a purchaser in good faith for valuable consideration, a document is deemed duly executed if it purports to be signed in line with section 44 ¹.

Section 40 protects people dealing with the company. In favour of a person dealing with a company in good faith, the power of the directors to bind the company, or authorise others to do so, is deemed to be free of any limitation under the company's constitution ³. That person is not bound to enquire about such limits and is presumed to have acted in good faith until the contrary is proved ³.

Deeds signed by individuals

Witness rules for deeds are set separately. Under section 1 of the Law of Property (Miscellaneous Provisions) Act 1989, an individual executes a deed by signing it in the presence of a witness who attests the signature, or by having it signed at the individual's direction in his presence and the presence of two witnesses who each attest. The deed must be delivered as a deed ⁶. These rules apply when an individual executes a document in the name of, or on behalf of, another person ⁶.

United States: Delaware practice

US company law is mostly state law. In Delaware, the business and affairs of every corporation are managed by or under the direction of a board of directors ⁴. Every corporation has such officers with such titles and duties as stated in the bylaws or in a board resolution, as may be necessary to enable it to sign instruments and stock certificates ⁴. Any number of offices may be held by the same person except where the certificate of incorporation or bylaws provide otherwise ⁴.

Section 158 says every holder of stock represented by certificates is entitled to a certificate signed by, or in the name of, the corporation by any 2 authorized officers. Any or all of the signatures may be a facsimile ⁵. A corporation has no power to issue a certificate in bearer form ⁵.