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Authority to Represent a Company: Study Guide
I. Core Concept:
I. Core Concept:
- Authority vs. Capacity: Authority refers to whether an individual signing a contract on behalf of a company has the right to do so, distinct from the company's legal power (capacity) to enter into the contract.
- Express or Implied Authority: Under the Companies Act 2006, individuals with express or implied authority can bind the company to a contract.
- It's difficult for a company to deny the authority of a director or senior manager in signing a contract.
- The company itself can enter into contracts.
- Directors' Powers: Default articles grant directors (as a group, not a single director) the power to manage the company, however, they can delegate these powers.
- Good Faith Protection: A person dealing with a company in good faith is protected from limitations in the company's articles of association affecting the directors' power to bind the company.
- This protection only applies if the person is a party to a transaction with the company.
- Validity of Actions: An action by a company cannot be challenged due to a lack of capacity based on anything in the company's constitution.
- These provisions aim to prevent challenges based on acts exceeding the company's or directors' powers.
- High-Value/Important Contracts: For significant contracts, or when dealing with unincorporated entities or those not regulated by the Companies Act 2006, seek legal advice.
- Recommended Checks:
- Verbal Confirmation: If no prior contact, call the representative.
- Companies Registry Search: Search the Companies House website (or equivalent) to confirm company details.
- Credit Report: Obtain a report from a credit reference agency.
- Board Resolution: Request a board resolution confirming the company's willingness to enter the transaction and authorizing the signatory.
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