In the recent case of Roger Williams & Others and Redcard Limited & Others, the Court of Appeal considered whether a contract which was signed by the directors of a company both in their capacity as directors and as individual sellers without expressly stating that their signatures were "by or on behalf of" the company was nevertheless validly executed by the company.
Pursuant to section 44 of the Companies Act 2006 (2006 Act), a document may be signed on behalf of a company by either:-
- affixing the company's common seal;
- two authorised signatories; or
- the attested signature of a director.
If a document is signed by two authorised signatories or by the attested signature of a director, and it is expressed to be executed by the company, this has the same effect as if executed under the company's common seal.
The question that arose in this case was whether a contract for the sale of freehold and leasehold interests, which did not bear separate signatures stated to be "by or on behalf of" the selling company, Redcard Limited (Redcard), was validly executed by Redcard given that two of its directors had signed the contract both in their capacity as directors of Redcard and in their separate capacity as individual sellers of the leasehold interests.
The parties in this case entered into a contract dated 28 July 2008 relating to the sale of five residential flats, the freehold of which was owned by Redcard. Each flat was let on long leases to individuals who were all directors and shareholders of Redcard (the Individuals). The contract also included the terms of the sale of the leasehold interests. The contract was varied by a supplementary contract dated 27 January 2009.
The definition of "Seller" in both the contract and the supplemental contract included the Individuals and Redcard.
The supplemental contract included various signatures under the title "SIGNED … SELLER". Two of those signatures were authorised signatories for Redcard and were also, individually, parties to the supplemental contract as they had agreed to sell their respective leasehold interests under its terms.
The purchasers refused to complete the purchase contending that the agreements had not been validly executed by Redcard. They argued that the agreements did not include a common seal of Redcard or separate signatures stated to be "by or on behalf of" Redcard.
The court held that the words "by or on behalf of" are not required to be expressly spelled out for a document to be validly executed by authorised signatories of a company within section 44(4) of the 2006 Act. As the signatures in the case at hand included the signatures of two authorised signatures and the definition of "Seller" included both Redcard selling its freehold interest and the individuals selling their respective leasehold interests, it was sufficient that the signatures were under the words "SIGNED …. SELLER".
Although the decision suggests that section 44 of the 2006 Act can be interpreted in a flexible manner, the court also states that, from a practical point of view, it is always important to expressly state the capacity in which the signatories are signing, in particular when individuals are signing in more than one capacity.