Friday, December 2, 2011

Secretary's Certificates

A contract is voidable if the individual that signed the contract did not have the authority. Officers of a corporation have implied authority to sign agreements because of their position as an officer.They may also have authority that the company has delegated to them. What about other individuals in the company or individuals that may not even work for the company? How do you check their authority?

The best way is to ask for what is called a "Secretary's Certificate". A “Secretary's Certificate” is a document that is signed and sealed by the Secretary of the Corporation that states that the Board of Directors has voted to delegate authority to a specific individual or group and whether they have the right to further delegate that authority. The Secretary's Certificate would need to be stamped with their seal or whatever is required by that jurisdiction for it to be an official corporate document.

If you have a sealed Secretary's Certificate stating that they have delegated authority to that individual any contract signed by that individual would be binding. If you had a statement that a specific individual is authorized to delegate authority for certain actions, you would also want a signed statement from that individual that documents the delegation. Without proof of the delegation and/or the right to delegate, the company could simply void the bid or contract saying that the person didn't have the authority.For example, a corporation could delegate authority to their general counsel to sign documents and allow the general counsel to further delegate that authority to outside law firms where that delegation would be subject to specific parameters.
Creating an agent that can bind the corporation would also require a delegation of authority by someone in the corporation that both has has been granted the authority and has the right to further delegate it.

In most companies the head of procurement is granted authority by the Board of Directors to sign procurement contracts and they are given the right to further delegate signing authority down to lower levels in procurement. That grant only applies to the legal entity they received their delegation of authority from. For example a CPO of a Parent Company would not have the right to delegate authority to a procurement manager in a subsidiary unless that subsidiary gave them the right to have both authority to sign for that subsidiary and the right to further delegate it to individuals within that subsidiary.

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