corporate authority

Approval Process

Most major actions require a formal vote by the board of directors or the shareholders. Documentation of these votes in the form of written consents or meeting minutes proves that the corporate authority was exercised correctly. Without these records, a contract might be challenged as unauthorized.

Signatory limits often restrict individual officers to specific types of transactions or dollar amounts. A chief executive might have the power to sign contracts under a certain threshold while larger commitments require board oversight.

Signatory Limit

Individual officers are usually restricted by the bylaws to specific types of transactions. This distribution of power protects the assets of the company from unilateral decisions.

Verification Need

Counterparties often demand a certificate of incumbency or a board resolution to verify that an individual has the right to bind the company. This provides the external party with legal certainty that the agreement is enforceable. Lack of proof of authority can stall transactions or lead to personal liability for the signer.