Quantifying Principal Exposure From Unrevoked Bank Resolutions In Executive Exits
Unrevoked banking resolutions maintain an executive's apparent authority, binding the corporation to unauthorized transactions until formal notice is delivered.
unrevoked authority
Meaning
Authorized agents possess the power to bind a principal even after the original intent has changed. Known as unrevoked authority, the status persists until a formal notice of cancellation is delivered to the relevant parties. It creates a risk where a former officer can still sign binding documents.
The law protects third parties who rely on the appearance of power in good faith.
Persistent Power
Administrative delays often leave a gap between the decision to remove an officer and the actual filing of the paperwork. During this window, unrevoked authority allows the individual to continue interacting with banks or suppliers. The firm remains liable for any contracts signed during this period.
Monitoring the status of these grants of power is a full-time task for corporate secretaries.
Notice Requirement
Communication with external partners is the only way to terminate the ability of an agent to bind the firm. Until a bank receives a new mandate, the previous unrevoked authority governs every transaction on the account. Sending a certified letter or an electronic notification provides the necessary proof of revocation.
Formal notification shifts the risk of subsequent actions from the principal to the third party.
Legal Reliance
Legal precedents prioritize the stability of commercial transactions by upholding the validity of acts performed under apparent power. If a supplier has no reason to doubt an unrevoked authority, the contract remains enforceable against the corporation. This doctrine prevents firms from escaping bad deals by claiming a secret internal change of mind.
Protecting the integrity of the public record ensures that business can proceed without constant re-verification of every signer.