In the Court of Appeal decision of Williams and Others -v- Redcard Limited and Others, the interpretation of Section 44 of the Companies Act 2006 (CA) came under scrutiny. It was contested that the words “by or on behalf of the company” needed to be expressed where the document was to be executed by authorised signatories signing on behalf of the company, as well as in their personal capacities.
Section 44(2) of the CA states that a document is validly executed by a company if it is signed on behalf of the company by two authorised signatories.
In the present case, Redcard was entering into an agreement for the sale of its freehold interest in a substantial residential building which was split into five self contained flats. These were let on long leases to individuals who were directors and shareholders of Redcard Limited. The buyers refused to complete the purchase. As a supplementary agreement to the main contract was not executed by Redcard, they argued that they were not compelled to complete.
Turning on the interpretation of Section 44 (4) of the CA, the Court of Appeal dismissed the buyer’s appeal stating that section 44 (2) of the CA was satisfied as two authorised signatories had signed the agreement. Furthermore, although the agreement did not expressly state that it was signed by or on behalf of the company, the words “signed earlier” clearly identified those signatories as both Redcard selling the freehold and the individuals (directors and shareholders) selling their leasehold interest.
Care should be taken over compliance with formalities of execution. Clearly defining who is executing a document and expressly stating in what capacity an individual is signing is recommended to avoid potential conflict.
Williams and Others -v- Redcard Limited and Others 2011 EWCA CIB 466
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