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
2006 [“CA 2006”], and earlier Companies Acts,
so far as it relates to
England and Wales.
To access the full text of CA 2006, 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 a person acting
under its authority, express or implied
[s. 43 (1)(b) CA 2006].
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 4 different ways :
1) as
with oral contracts, by any person acting under the
company’s authority, express or implied [s. 43
(1)(b) CA 2006] ;
2) by the signature of a Director and the Secretary,
or of two Directors, and expressed (in whatever words) to
be executed by the company [s. 44 (2)(a) and s. 44 (3) CA
2006]. 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. 43 (1)(a) CA 2006]. 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
"constitution",
and in particular its Articles of Association, i.e. the
rules for its management, which determine who the
authorised signatory or signatories should be. For
private companies limited by shares and incorporated
before 1st October 2009,
Table A of the
Companies (Tables A to F) Regulations 1985 could be adopted
as the Articles of Association either in whole or in part,
or Table A could even be completely excluded [s. 8
Companies Act 1985]. Generally, Table A was 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”. For
companies incorporated since 1st October 2009,
Model Articles can
be adopted [with or without amendments], and Art. 49 of
the
Model Articles for Private Companies Limited
by Shares sets
out the requirements for sealing by the company, which
must be authorised by the directors in any event.
In fact, a company does not need to have a common seal
[s. 45 (1) CA 2006] ;
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.
4) By a director of the company in the presence of a
witness who attests the signature [s. 44 (2)(b) CA 2006].
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 requirements for deeds signed/executed by a
company are set out in
s. 46 CA 2006 and
[for Attorneys signing/executing deeds on behalf of
companies] in
s. 47 CA 2006.
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 and Art.
49 of the Model Articles for Private Companies Limited by
Shares etc.
apply also in the case of a deed executed by the common
seal.
As
indicated at the beginning of this article, this is
intended only as a brief general outline of the relevant
law and practice, and it is NOT intended to provide - nor
is it to be relied on as being - advice as to company law
and/or contract law in England and Wales, for which you
must take the advice of your own professional advisers.
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