A reader recently asked as follows: If someone is signing a contract on behalf of more than one party, and that person serves each party in the same capacity, would it be OK to use just one signature block, as in the following example?
ACME HOLDINGS, LLC
ACME ACQUISITIONS, LLC
ACME INVESTMENTS, LLCBy: ______________________
Richard Roe
President
I responded that I’d feel more comfortable with the above arrangement if you added the notation “on behalf of each of the three above-named entities,” or some such. But saving a bit of space and sparing the signatory the ordeal of signing a couple of extra times seem negligible benefits. I have no plans to use such a three-for-one arrangement. But what if one person was signing for, say, six or more parties? Hmmm. Does that ever happen? If anyone can point to a publicly available contract that uses this technique, please post a link or email me a pdf.
It often happens in, say, a securities offering where one executive is signing on behalf of all of the subsidiary guarantors of a company. Seems worth it to me; is there a real concern that a particular subsidiary guarantor might be held not to have executed the agreement?
Gregory: No, I don't think it creates an enforceability problem. It's just that until a sufficient number of parties are involved, the drawbacks of deviating from the standard arrangement outweigh the benefits. I haven't given much thought to what a sufficient number might be. Ken
If it doesn't create an enforceability problem, what are the drawbacks of deviating from the standard arrangement?
I have one large corporate client with numerous subsidiaries (over 20) which all have to sign financing agreements and other agreements – we always have individual signature blocks for each entity even though the same person is signing on behalf of all of the companies. I would love to list them all and have the principal sign once, but I highly doubt banks and other investors will accept that approach.
DavidBags: The path of least resistance is to apply the same approach across the board, unless doing things differently provides sufficient benefits. In your case, it might be worth it to use the one-signature-block approach, but as you suggest, banks are unlikely to go for it, as they're vastly risk-averse. Ken
For the position under English law, see section 44(6), Companies Act 2006: "Where a document is to be signed by a person on behalf of more than one company, it is not duly signed by that person for the purposes of this section unless he signs it separately in each capacity." In other words, you need to have separate signature blocks for each company.
That is pedantic nonsense up with which I will not put. Thankfully, I live in the USA. If the intention is clear–e.g., by including “on behalf of” language, as suggested–then any court should accept that. It would be farcical if they did not. That’s just my 2 pence on the subject. But wait…. Even the UK Courts appear to have recently clarified the matter – see: “Fresh Court of Appeal guidance on execution of documents by a company” by Eversheds, on the UK Court of Appeal case, in 2011, of “Williams & Others v Redcard Ltd & Others”. Link:
http://www.eversheds.com/global/en/what/articles/index.page?ArticleID=en/Education/Fresh_court_of_appeal_guidance_160611
I think we should all strike a blow for rationality, and handle this situation in the most efficient way, albeit by also ensuring that the signatory’s intention is clear (by adding “on behalf of” language”).
I think I’ve found some support for the U.S. less trap-filled than the UK is (or was) on this issue. See: https://www.dep.state.fl.us/legal/Enforcement/appendix/models/signatory.pdf
The State of Florida directs that for multiple entities, a single person can sign, this way, where the person has authority over several entities which themselves were supposed to sign. Seems to me that this supports the “efficiency” principle, though in a second-order case where multiple entities are themselves supposed to be signing something, and a single person has authority to sign on behalf of those entities.
Land Developer, L.L.C., a Florida limited liability company,
By: Development Solutions, L.P., a Florida limited partnership,
Its Manager,
By: Developer Company, a Florida general partnership,
Its General Partner,
By: Greenspace Corporation, a Florida corporation,
Its Managing Partner,
By: _________________________________________
Name: Jane R. Doe
Title: President [or Secretary or Treasurer
Thank you for gnawing on this bone; that’s useful information.
Mark, you’ve overlooked that in s.44(6) there is the proviso “for the purposes of this section”.
S.44 applies only to where the documents are to be executed BY a Company, which is a more formal step, and particularly (and in practice, mostly) relevant to deeds – see s.46(1)). Given the solemnity of deeds, additional execution formality is I think reasonable.
S.44 is not relevant where the document does not need to be executed BY the company and where execution only by a person ON BEHALF OF the Company will suffice. This will be the case for all “simple” (i.e. not a deed) contracts and therefore 99.9% of UK commercial contracts requiring a signature. S.43(1)(b) makes this clear, and s.43 has no equivalent requirement to s.44(6). That said, convention in the UK is to have one signature block per company regardless of whether the document is a simple contract or a deed, so this knowledge is not going to save one time any time soon…
I appreciate that the words they chose for the proviso in s.44(6) can mislead one, unless you hold in mind s.44(2), which says “A document is validly executed by a company if it is signed on behalf of the company…”. Perhaps it would have been clearer if instead of writing “Where a document is to be signed by a person on behalf of more than one company, it is not duly signed by that person…” they had instead written “Where a document is to be executed by more than one company each acting by the same signatory, it is not duly signed by that signatory…” but there we go.
Mark, Thank you for that info!
Mark, thank you for this response. I have always done a separate signature as most finance documents require multiple signatures but it is really helpful to confirm this! Thanks again.
Does this apply if the same person represents the only two parties to an agreement? For example, if two companies, which are owned and directed by the same person, enter into a contract, can that one person sign on behalf of both of the parties to the agreement?
I’m not aware of a jurisdiction where that scenario would pose a problem.
Thanks, Ken!
What about an employment agreement for the CEO where the CEO signs as CEO of the company and as the employee?
The issue there isn’t enforceability, but instead the appearance of self-dealing.