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.
Reason 2 – the Companies Act 2006, Section 40
Section 40 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.
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.” ↩
There are a lot of ifs and buts, but none help the notary in knowing the situation where is a signing a document. ↩