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SIGNING ON BEHALF OF THE COMPANY

Section 126 Agent exercising a company's power to make contracts

1. A company's power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company's express or implied authority and on behalf of the company.
2. The power may be exercised without using a common seal.
3. This section does not affect the operation of a law that requires a particular procedure to be  complied with in relation to the contract.

The Corporations Act 2001 contains provisions (see below) in relation to the execution of documents which, if complied with, allow people dealing with the company to make certain limited assumptions about the authority of those signing to bind the company.

Section 127 Execution of documents (including deeds) by the company itself

1. A company may execute a document without using a common seal if the document is signed by:
   1. 2 directors of the company; or
   2. a director and a company secretary of the company; or
   3. for a proprietary company that has a sole director who is also the sole company secretary - that director.
      
      Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(5) for dealings in relation to the company.
2. A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:
   1. 2 directors of the company; or
   2. a director and a company secretary of the company; or
   3. for a proprietary company that has a sole director who is also the sole company secretary - that director.
      
      Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(6) for dealings in relation to the company.
3. A company may execute a document as a deed if the document is expressed to be      executed as a deed and is executed in accordance with subsection (1) or (2).
4. This section does not limit the ways in which a company may execute a document (including a deed).

Standard company constitutions normally reflect the provisions of section 127(2) in relation to the use of a common seal. Where the company wishes to make it clear that it's documents can be executed under seal other than in accordance with section 127(2) the 'common seal' clause in the constitution can be amended accordingly. However, this does not ensure that those dealing with the company will not require it to comply with section 127(2).

Similarly, when a common seal is not being used, those dealing with the company may require it to comply with section 127(1) notwithstanding section 126.

Section 198B Negotiable instruments (replaceable rule - see section 135)

1. Any 2 directors of a company that has 2 or more directors, or the director of a proprietary company that has only 1 director, may sign, draw, accept, endorse or otherwise execute a negotiable instrument.
2. The directors may determine that a negotiable instrument may be signed, drawn, accepted, endorsed or otherwise executed in a different way.

Where the company wishes to authorise the execution of a specific negotiable instrument or a class of negotiable instruments other than in accordance with section 198B(1) the directors should pass a resolution setting out the authority pursuant to section 198B(2).

Disclaimer

The above sections and comments:

• do not purport to include all sections of the Corporations Act 2001 which are relevant to the execution of documents by a company;
• are not substitutes for obtaining legal advice about the execution of documents by a company;
• are only current to 11/03/2002

Date Printed  13 August 2002
ASIC Website  www.asic.gov.au