A comprehensive approach to corporate resolutions for signing authority

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A comprehensive approach to corporate resolutions for signing authority

By iDeals Board
December 27, 2023
12 min read
corporate resolution signing authority

The power to sign important documents is critical for any organization. Why? Imagine this scenario: a company rapidly expanding, venturing into new territories and markets, acquiring other entities, and navigating business growth. In such a situation, who can bind the company through legal documents on behalf of the corporation? 

The answer lies in the corporate resolution for signing authority. The ability to sign contracts on behalf of a corporation is a gateway to legal and financial implications shaping the board of directors and corporations. 

This article provides simple wording for corporate resolution signing authority and explains its role in corporate governance.

What is a corporate signing authority resolution

The corporate resolution for signing authority permits certain corporate executives with legal standing to sign contracts on the corporation’s behalf. These resolutions are officially recorded by a corporate secretary, signed by the board of directors, and stored among a company’s official records in a document repository

When assigning a responsible person to sign critical documents on behalf of the company, every board and nominating committee must carefully consider the risks. These individuals have the authority to form legally enforceable contracts that bind the company to certain agreements. 

Usually, only high-ranking officers represent the organization. However, employees with specific roles and responsibilities may be granted the authority to sign various types of contracts, such as: 

  • Employment contracts 
  • Real estate sales 
  • Grant signing
  • Leasing agreements
  • Approving of obligations and responsibilities of the corporation

Then, the introduction of the corporate signing authority resolution during the board meeting sets the stage for organized decision-making and responsibility delegation within the business. In our devoted article, learn how to run a board meeting efficiently. 

Understanding decision-makers: signing authority

The authority to sign legal documents and agreements on behalf of an organization is crucial in corporate governance and board reporting. Moreover, it’s very important for the proper functioning of the organization, its transparency, and compliance. There are various reasons why signing authority is important:

  • Ensuring accountability and openness  
  • Mitigating the likelihood of unauthorized activities
  • Streamlining decision-making processes
  • Strengthening compliance measures
  • Cultivating more robust business relationships 

Let’s take a deeper look at the duties and roles of signing authority. 

  1. Document execution. A signing authority’s principal responsibility is to execute legal documents on behalf of a company. Signing contracts, agreements, legal papers, financial statements, and other significant company documents is part of this.
  2. Ensuring compliance. They must guarantee that all papers signed are by internal business rules and laws. This entails comprehending the substance and ramifications of the papers to verify they are legal and within the scope of the corporation’s authority.
  3. Verification and accuracy. The signing authority is responsible for verifying the accuracy and completeness of the information in the papers before signing. This may entail consulting with other departments such as legal, finance, or operations.
  4. Authority limits. They must understand the limitations of their signature power as stated by the company’s bylaws or board approval. This involves knowing which choices or transactions require their signature and which may necessitate extra approval.
  5. Decision making. They may be involved in the decision-making process, particularly when choices are codified through signed agreements. This might include attending meetings or discussions about these decisions.
  6. Risk management. To safeguard the organization from legal or financial liability, they must identify and manage risks linked with the papers they sign.

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How to establish signing authority?

Writing the signing authority of corporate resolution belongs to the responsibilities of a qualified secretary. The following are some procedures to keep in mind when providing someone with signing authority.

1. Establishing initial signing authority

This is the fundamental stage in which an organization identifies and names persons who have the legal authority to sign on its behalf. This goes with:

  1. Identifying organizational jobs that require signing authority, such as executives or department heads.
  2. Establishing eligibility requirements for these roles, such as seniority, experience, or specialized credentials.
  3. Appointing these persons formally, usually by a board resolution or a similar official process.
  4. Defining the extent of their signature power, such as the sorts of papers they may sign and any limitations.

2. Documenting authority

Individuals who have been given signing authority must have that permission properly recorded. This stage entails:

  1. Making official records that include the names and positions of those with signing power.
  2. Specifying the scope and limits of each person’s signature authority.
  3. Keeping these data secure and accessible, assuring their availability for legal or audit needs.
  4. When staff or signing authority changes, these records must be updated.

3. Communicating the authority

It is critical that the appropriate persons within and outside the business understand who has signing power. This includes the following:

  1. Notifying internal departments and staff of who has the power to sign various sorts of papers.
  2. Communicating with external entities, such as banks, legal entities, and commercial partners, regarding who is allowed to sign on the organization’s behalf.
  3. To avoid misinterpretation or fraudulent activity, ensure that communication is precise and unambiguous.

4. Regular review and auditing

To ensure that the signing authority procedure stays relevant and effective, the organization must examine and audit it regularly. This entails:

  1. Conducting audits to guarantee compliance with corporate rules and external legal obligations.
  2. Checking to see if the people who have signing power are still fit for the role.
  3. Updating the signing authorization procedure in reaction to organizational changes, such as reorganization or changes in legal requirements.

5. Maintaining legal and regulatory compliance

A company must ensure that its procedure complies with all applicable legal and regulatory requirements. This includes the following:

  1. Maintaining current knowledge of laws and regulations affecting signing authority, such as contract law, corporate governance requirements, and industry-specific legislation.
  2. Assuring that all activities made by persons having signing power are legal and according to the organization’s regulations.
  3. Controls and checks are being put in place to prevent inappropriate use of signing power.

Sample corporate resolution for signing authority

Although the corporate resolution signing authority gives the right to conduct the company’s financial and legal activities, it must be correctly written. The resolution must contain certain key elements to be legally valid:

  1. Title and introduction. The title of the document should indicate its objective, followed by an opening sentence identifying the organization.
  2. Date and location. Indicate the date and venue where the resolution will be passed.
  3. Board of directors’ declaration. A statement indicating that the resolution was passed by the board of directors or an authorized body.
  4. Recitals. This section offers the backdrop or justification for the resolution, frequently emphasizing the need for signing authority. 
  5. Resolution statement. The heart of the text outlines the exact delegation of authority. It should explicitly identify the individual(s) being granted signing powers, the scope of that authority, and anyhow it is limited or conditions that may be attached.
  6. Scope of authority. Define the sorts of transactions or choices that the authorized person can make. Financial transactions, legal agreements, and other operational choices may fall under this category.
  7. Duration of authority. Specify how long the signing authority is valid for. This might be for an infinite period until revoked, or a set amount of time.
  8. Approval and signatures. The board of directors must adopt a resolution by a vote. This should include spaces on the paper for signatures from the board chairman, secretary, or other authorized heads.
  9. Attestation by secretary. A declaration signed by the digital company secretary or another official attesting to the resolution’s legitimacy and the recorded vote’s correctness.
  10. Exhibits or attachments (if applicable). Attach any additional documents or exhibits referred to in the resolution.
  11. Corporate seal (if applicable). To properly endorse the document, affix the company seal, if the corporation has one.

Mitigating challenges while signing authority corporate resolution

Even if you have a corporate resolution form for signing authority, you may encounter difficulties establishing it.

1. Lack of insurance coverage

Solution: Obtain Directors and Officers (D&O) insurance to provide financial protection for individuals with signing authority. This coverage can help mitigate personal liability risks, making it more attractive for qualified talents to take on leadership positions. It’s important to regularly review and update the insurance coverage to align with the organization’s needs.

2. Legal compliance concerns

Solution: Seek legal counsel from corporate attorneys to verify that all company decisions adhere to all applicable laws and regulations. Additionally, maintain a proactive connection with legal counsel to remain up-to-date on shifts in business rules and regulations. Periodically conduct legal compliance audits to detect and promptly correct any possible concerns.

3. Insufficient training and awareness

Solution: Implement extensive training programs for those with signing power. This training should address their responsibilities, legal requirements, and the possible repercussions of improper behavior. In addition, regularly keep them up to date on changes in rules, industry standards, and best practices.

4. Risk of unauthorized actions

Solution: Implement dual permission or approval processes for major decisions or transactions. To provide an extra layer of oversight, have two or more people examine and approve activities. Also, to limit the risk of illegal acts and improve responsibility, clearly identify and convey the approval processes.

5. Failure to update corporate resolutions

Solution: Establish a regular review plan for corporate resolutions to ensure that they are current and represent the organization’s current situation. Also, assign responsibility for monitoring resolution updates and make it a habit to evaluate them amid organizational changes.

Best practices for corporate resolution of signing authority and case studies

Adherence to best practices when adopting corporate resolutions for signing authority is critical for maintaining both legal compliance and operational efficiency. 

Best practices for corporate resolution of signing authority and case studies
  1. Define the extent and limitations of the signing authority. To avoid ambiguity and misuse, specify the sorts of permitted transactions and any monetary restrictions or other deeds.
  2. This helps to ensure it meets the company’s current operational needs and legal obligations. Also, it aids in changing the corporate environment or organizational structure.
  3. Implement control mechanisms or other instruments. This includes requiring dual signatures for large transactions or establishing transaction value thresholds that require further approval. This reduces the possibility of fraud and assures responsibility.
  4. Keep complete and easily accessible records of all resolutions and accompanying papers. This ensures openness and a clear audit trail for internal or external audits.
  5. Ensure that the resolution and its execution are under applicable laws, regulations, and industry standards. This aids in the avoidance of legal issues and the preservation of business integrity.

Case study of corporate resolution signing authority

The 2018 Cambridge Analytica incident demonstrated the need to have adequate corporate resolution signing authority when dealing with sensitive customer data. The company was engaged by President Trump’s 2016 campaign and accessed the private information of over 50 million Facebook members.

Cambridge Analytica obtained information from Facebook users and their friends using an app, in violation of Facebook’s standards. Even though only 270,000 users agreed to collect data, Cambridge Analytica obtained almost 50 million profiles. Then, Facebook disabled the app, required data destruction certification, and suspended Cambridge Analytica.

What role did the signing authority have in resolving this situation? In response to the Cambridge Analytica scandal, Facebook established a corporate resolution signing authority. To prevent unauthorized access and use of user data, the resolution demanded board review of contracts involving third-party data providers. 

Thus, the scandal highlights the importance of proactive security measures in mitigating risks and rebuilding trust with users and regulators. 

Corporate resolution signing authority template

To ensure that you don’t overlook anything, use this corporate resolution for signing authority template. 

Corporate Resolution of [Company Name] 

Date of Resolution: [Date] 

Board Resolution Granting Signing Authority 

WHEREAS, the board of directors of [Company Name] deems it necessary and prudent to designate signing authorities for conducting financial and legal transactions; 

BE IT RESOLVED, that the board of directors hereunder authorizes [Authorized Individual’s Name], [Position], to sign, execute, and endorse on behalf of [Company Name] for all financial transactions, legal documents, and other official agreements. 

The powers granted include, but are not limited to, the authority to: 

✔️ Open, operate, and close bank accounts. 
✔️ Sign checks, drafts, and other negotiable instruments.
✔️ Enter into binding agreements and contracts. 
✔️ Perform any other acts deemed necessary for the effective financial management of [Company Name].

This resolution shall remain in effect until expressly revoked or amended by a subsequent resolution of the Board of Directors. 

ADOPTED and APPROVED by the Board of Directors of [Company Name] this [Date]. 

How board portals help with corporate resolution signing authority

In 2021, 81% of organizations attempted to use digital technologies at all executive levels. Since then, a study of 400 board directors conducted by Ernst & Young reveals that 70% of executives want greater technological innovation in 2023. Board portals provide three benefits to corporate and charity board directors: information access, centralized communications, and data protection.

In light of the growing popularity of board portals, let’s find out how iDeals Board tools streamline the creation of corporate resolution signing authority:

  1. Secure document management. This is a safe and centralized platform for managing corporate resolution documents, including signing authority. Secure document storage protects sensitive information and allows authorized users to view relevant documents with correct permissions.
  2. Electronic signature integration. Many board portals provide electronic signature integration, allowing authorized board members to electronically sign papers. This feature simplifies the signing procedure, making it more efficient and decreasing the need for actual signatures.
  3. Version control and tracking. Version control tools make it easier to track changes to corporate resolutions over time. This guarantees that board members are working with the most up-to-date and correct version of the resolution. 
  4. Role-based access control. Board portals often include role-based access management, allowing administrators to assign individual board members particular responsibilities and rights.
  5. Meeting management tools. Board portals often provide tools for managing board meetings, including planning, scheduling, and documentation. These tools ensure that discussions about signing authority resolutions are well-organized and documented for easy access by board members.

Key takeaways

  1. Corporate signing authority resolutions specify who has the legal authority to bind the corporation through contracts.
  2. Individuals with the authority to sign can create legally binding contracts such as employment contracts, real estate transactions, and other important agreements.
  3. Establishing signing authority involves identifying roles, setting eligibility requirements, formal appointments, defining scope and limits, and regular review/audits for effectiveness.

FAQ

What is proof of signing authority for a company?

A company’s proof of signing authority is a formal document that identifies employees who are allowed to sign legal papers and execute transactions on the company’s behalf. Typically, this documentation takes the form of a resolution approved by the company’s board of directors or a similar governing body. It might include documents such as a complicated board decision, corporate rules, or a power of attorney. 

These documents help to authenticate that the individual signing a contract, agreement, or other legal instrument has the necessary authorization to do so, therefore tying the company to the document’s provisions. 

What is a company resolution for an authorized signatory?

A corporate resolution for an authorized signatory is a formal decision issued by the company’s board of directors or governing body that allows particular persons the authority to serve as the firm’s signatories. This resolution is a written document that specifies the extent of the authority granted, such as the sorts of papers they can sign and any constraints on their powers. 

The decision is normally documented in the minutes of the above-named corporation and may be requested as confirmation of the signatory’s authorization by financial institutions or other parties.