SEE A LAWYER LEGAL S

Imagine in an office of twenty people if it was only the “boss” who had authority to sign for goods and services. While it might make sense for a shipment worth $1M, what about a new stapler, more teabags, or a new airconditioner in the office.

As you can imagine, business would grind to a halt.

Authority: The strict rule is that only directors and officers can bind a company to an agreement. But the onus is on you, as a business owner, to get your house in order. The “indoor management rule” in o many times, people say, “but that’s not my signature, so I don’t have to pay.” When in fact the agreement has been signed by someone on staff. Then they say, “there is a strict rule around here that only the directors have authority to sign documents.”the Corporations Act allows a salesperson, who has made valid enquiries and is acting in good faith, to assume that your warehouse manager was authorised to deal in transactions that would be common for a warehouse manager, or your fleet manager has authority to deal with common vehicle matters. This means it’s up to you to get your internal affairs in order within your company, not up to outsiders.

Ratification: Of course, if your company has been paying an invoice every month for up to 12 months, it is a bit much to now say “that’s not my signature”. Your company has accepted the benefit of goods provided and then paid those invoices thereby ratifying the agreement entered. However, there are other options:

1. Purchase orders/supplier portalsmany big companies (i.e., Woolworths, BHP) ensure that only designated suppliers provide goods by requiring purchase orders or approved supplier portals. Without a purchase order number or access to the supplier portal, suppliers will not get paid.

2. Limits – often authority will be provided to certain people within an organisation, but only up to certain monetary limits i.e. up to $10,000, anything above that needs Board approval.

3. Staff education - ensuring that all your staff know who has the power to approve different purchases i.e., the CFO for financial matters, the Fleet Manager for vehicle expenses, the Store Manager for warehouse purchases.

Business take-away: If you are in business, it is up to you to get your internal affairs in order with regards to who can sign what and who can authorise certain transactions. It is not enough to simply maintain, “but that’s not my signature.”