LIMITED COMPANIES – EXECUTING DEEDS
Directors of Limited Companies are very busy people. They have to make the decisions and they often need to delegate tasks to be carried out by others because there are not enough hours in the day to do everything themselves.
A typical case is a decision to buy or sell or contract in respect of foreign goods or property. More often than not, the Company will need to give Power of Attorney to its agents aboard in order for them to be able to complete the deal.
Often I will be introduced to a manager or executive of the client Company who has been asked to “sign the Power of Attorney” because the Directors themselves are otherwise engaged. The larger the company, the more often this is the case.
This causes a problem because in England and Wales, a Company can only effect a Power of Attorney by executing a Deed. A Deed is a legal document whose characteristics are defined by law. For a Company, a Deed can be executed by 1) affixing the Seal in the presence of two Directors or of one Director plus the Company Secretary, or 2) signature of two Directors or of one plus the Company Secretary, or 3) Since 2008, by signature of one Director alone, provided that it is witnessed Note that option 3, introduced by the Companies Act 2006 section 44, does not enable execution of a Deed by the Company Secretary before a witness, unless the Secretary is also a Director.
Also note that, notwithstanding the provisions of S 44, I cannot certify due execution by a Company by one director alone, or for that matter by two (or one and the company secretary), without checking the provisions of the Memorandum and Articles (as to whether the proposed “transaction” is within the powers of the company and for any particular requirements as to execution) and also having sight of a Resolution by the Board of Directors authorising the particular director(s) to execute the document in question.
The concerns are firstly as to whether the proposed transaction is within the powers of the Company; secondly whether S 44 overrides any specific provisions in the Articles restricting who may sign for the Company; thirdly (and even if S 44 does override) to avoid the possibility of the notary facilitating a fraud by one director (or two or one and the company secretary) on the Company. I would add, fourthly, to avoid any third party, relying upon the notary’s certificate, being exposed to any possibility of being caught up in litigation by a Company seeking to undo a fraudulent adventure by one or more of its directors.
It is generally preferable to have third party witness rather than the notary acting as witness as well as the certifying authority. If there is to be a third party witness then unless that witness is known to me I require that the witness produce identification and would record details (and retain copies) as for the appearer.