COMPANY
CONTRACTS AND DOCUMENTS
An
article by
GREGORY
TAYLOR
This article is intended as a brief general outline of the
main elements of the law of
England and Wales dealing
with the formalities for contracts and other documents for
companies registered under the UK’s Companies Act
1985 [“CA 1985”], as amended, so far as it
relates to
England and Wales.
This article reflects some of the changes brought into
effect on
15 September 2005 by
the
Regulatory Reform (Execution of Deeds and Documents) Order
2005 (SI 2005/1906).
To access the full text of the 2005 Order, please
click
HERE
To
download the DCA’s Guidance on the 2005 Order [PDF
format], please click
HERE
A
company is a legal person, and just like an individual (or
"natural" person), a company can enter into contracts and
other legal arrangements, sue and be sued, and own and deal
with various types of property.
CONTRACTS
English law does not generally prescribe any particular
formality for contracts - the main
exceptions in practice are contracts for the sale/purchase
of land, and consumer credit agreements (both of those
types of contract must be in writing ; in the case of
consumer credit agreements, prescribed forms must be used -
this is beyond the scope of this article).
One would, however, generally expect that, the higher the
value and importance of the transaction, the more
likely it would be that the company's Directors and/or
Secretary would be involved in the relevant contract
or other arrangement, and/or that it would be in writing,
and/or that it would be the subject of a resolution passed
by a meeting of the company's Board of Directors or of the
company in general meeting.
Oral
contracts are
entered into on behalf of a company by any person acting
under its authority, express or implied [s.36(b) CA
1985]. Such a person may, or may not, be an officer of
the company, such as a Director or the Secretary,
and may generally be assumed - as against
third parties - to be authorised if the
relevant transaction appears to be within the area of
responsibility and/or competence of that person acting in
the normal course of the company's business. So, for
example, it could be generally assumed that a person
described as the company’s “Marketing
Executive” has general day-to-day authority on behalf
of the company in relation to marketing matters, and that a
cashier in a company’s supermarket has authority on
behalf of the company to enter into contracts for the sale
of goods to its customers at the checkout.
Written
contracts can be
entered into by a company in 3 different ways :
1) as
with oral contracts, by any person acting under the
company’s authority, express or implied [s.
36(b) CA 1985] ;
2) by the signature of a Director and the Secretary,
or of two Directors, and expressed (in whatever form
of words) to be executed by the company [s. 36A(4) CA
1985]. An appropriate form of words would be :
Signed by
ABC LIMITED acting
by
Name : …... Signature : ...... [Director]
and
Name : ...... Signature : …... [Director/Secretary]
3) by affixing the company’s common seal in the
presence of, and with the signatures of, (usually) a
Director and the Secretary, or of two Directors, or of
other persons authorised so to sign [s. 36(a) CA 1985, s.
36A(2) CA 1985]. A formulation seen in practice is as
follows :
The Common Seal of
ABC
LIMITED
was hereunto affixed
[SEAL]
in the presence of :-
Name : ...... Signature : ...... [Director]
Name : …... Signature : ...... [Director/Secretary]
If the common seal is to be used, it is the company’s
Articles of Association, i.e. the rules for its management,
which determine who the authorised signatory or signatories
should be.
Table A of the
Companies (Tables A to F) Regulations 1985 can be adopted
by a company as its Articles of Association either in whole
or in part, or it can even be completely excluded [s. 8 CA
1985]. Generally, Table A is adopted with various
amendments, and Art. 101 of Table A states : “The
seal shall only be used by the authority of the directors
or of a committee of directors authorised by the directors.
The directors may determine who shall sign any instrument
to which the seal is affixed and unless otherwise so
determined it shall be signed by a director and by the
secretary or by a second director”.
In fact, a company does not need to have a common seal [s.
36A(3) CA 1985] ; in practice, the use of the common seal
is becoming increasingly rare, and most written
contracts are entered into in accordance with 1)
and 2) above.
DEEDS
For certain transactions, the written form of a
DEED must be
used. A deed is a formal signed/executed document which
developed historically out of the common law, and a deed
must be used, among other things, for Powers of Attorney,
and mortgages and transfers of land. A deed must make
clear, on its face, that it is intended as a deed [s.
1(2)(a) Law of Property (Miscellaneous Provisions) Act
1989]. The usual form of wording for a deed by a company is
as follows :
Executed as a Deed by
ABC LIMITED acting
by
Name : ...... Signature : ...... [Director]
and
Name : ...... Signature : ......[Director/Secretary]
If the company is using its common seal, a possible
formulation would be :
Executed as a Deed by
ABC LIMITED
By the affixing of its Common Seal
[SEAL]
in the presence of :-
Name : ...... Signature : ...... [Director]
Name : ...... Signature : ...... [Director/Secretary]
The comments above concerning Art. 101 of Table A etc.
apply also in the case of a deed executed by the common
seal.
As indicated at the beginning of this article, this is only
intended as a brief general outline of the relevant law and
practice. The 2005 Order contains detailed provisions (now
incorporated as statutory amendments) dealing with
situations not mentioned above, but which can be
encountered in practice, such as when a Director/Secretary
is not an individual [s. 36A(8) CA 1985], etc.. This
article is also not intended to provide general advice as
to English contract law, for which other resources should
be consulted.
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