Autumn Tree Case Highlights Importance of Determining Who Can Sign on Behalf of a Company

A recent decision of the High Court has highlighted the dangers both companies and people dealing with them need to be aware of when of relying on the actions of a single director. 

In the Autumn Tree case, one of two directors purported to complete an agreement on behalf of the company.  The case turned upon provisions in the Companies Act dealing with directors and their ostensible authority to bind the company.  It has always been the case that persons dealing with the company are entitled to rely upon what is known as the “company's internal management” being in order; that is to say there is a presumption of regularity.

In the Autumn Tree case it was held that the director who signed the agreement on behalf of the company did not, merely by being a director, have authority to do so.  It is not within the power of a director to act unilaterally unless they are the sole director.

For the company to be bound, there needed to have been a resolution of both of the directors either to approve the sale or to authorise the director that signed to complete an agreement. The case is a cautionary note both for companies with more than one director and for those dealing with them.

To learn more about commercial and property law, contact the Gillespie Young Watson team. Visit the website at https://gywlaw.co.nz/ today.