3 reasons why a notary asks for a board resolution when a director signs a document

Reason 1 – the articles of association

The default provision in most companies’ articles of association is that the directors have the power to manage the company – not any one director.[1]

Reason 2 – the Companies Act 2006, Section 40

Section 40[2] states that the power of the directors to bind a company is free of any limitation in the company’s constitution. But this presumption applies “in favour of a person who deals with the company in good faith”.

A person “deals with” a company only if they are a party “to any transaction or other act to which the company is a party”.

But a notary is not a party to any transaction or other act, so cannot rely on this statutory presumption.

Reason 3 – Other board resolutions etc

It is possible that there may be a restriction on the power or authority of a director (a specific one, a class of directors or all directors) to sign a document because of:

• previous directors’ board resolutions;
• shareholders’ resolutions;
• provisions in shareholder agreements;
• loan documents; or
• other documents.

Not all may be open to, or available for, inspection. Practically, the only way would be to check all these of the documents – even if they all made available. Which in a long-standing company can be a time-consuming task (and expensive for the client company) – even if the company is willing to allow the notary to carry out the check.

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1. The model articles of association state: “Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company.”  ↩

2. There are a lot of ifs and buts, but none help the notary in knowing the situation where is a signing a document.  ↩

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How to describe a company

Companies often need to sign documents provided from abroad. The way companies are described in those documents varies, but often they do not clearly or correctly describe the company involved. For example:

• stating that a company is incorporated in the UK:
  • In the UK companies are incorporated in the part of the UK where they have their registered office;
  • For example: a company having its registered office in London, will be registered in England and Wales

not stating the registered number of the company:

• In the UK it is possible to change the name of a company but not its registered number;
• In some other countries it is not possible to change either;

not stating the registered office:

• by convention for UK companies the registered office is stated;
• it is possible to use any other address, but by convention the principal business address is stated;

not stating the full name of the company:

• the full (proper) name of the company is that found on its certificate of incorporation (or on the Companies House website);
• the registered name must appear in all documents that a company produces[^1]

Why does this matter

Can someone other than a director of a company sign a power of attorney?

Introduction

Powers of attorney are one of the most common documents that need signing by a company engaging in activities in other countries. A company should always execute powers of attorney should always execute them as deeds. The reasons why powers of attorney = deeds are described in a note available on my website.

Although the common situation is that the directors sign powers of attorney for their company, sometimes there is a requirement that someone other than a director should be able to sign.

Power-mad attorneys in Spain

The problem

If you are involved in a property transaction in Spain you will be almost invariably provided with a power of attorney to sign[^1]. And almost, just as invariably, the power of attorney will include the following 5 type of clauses:

1. the attorney has the power to buy any property/goods on your behalf at the price and on what conditions the attorney wishes;
2. the attorney has the power to sell any property/goods on your behalf at the price and on what conditions the attorney wishes;
3. the attorney has the power to open and operate bank accounts on your behalf (sometimes the power extends to borrowing money in your name); and
4. the attorney has the power to act in conflict to your best interests[^2]; and
5. the attorney can delegate her/his powers to other people, who need not be lawyers.

Although there is no explicit wording, the power of attorney does not have an expiry date[^3].

A very one-sided agreement which most people would not to sign. But most people do sign just such document…

England is not the UK for a company

Problem

Documents prepared in another country but needing signing in England by a company often state that the country of incorporation is the UK.

Technically this is incorrect. In fact the country of incorporation is the place where the registered office of the company (e.g. in England and Wales or Scotland or Northern Ireland, etc).

What is the solution?