Two Court of Appeal judgments remind us that when a company needs to sign a legal document it is never as simple as signing on the dotted line. You must always assess carefully the nature of your document and any statutory rules for its signature.

How is a document signed “by” a company?

In Hilmi & Associates Ltd v 20 Pembridge Villas Freehold Ltd [2010] EWCA Civ 314, the Court of Appeal considered what signature “by” a company entailed. The Court held that under the rules on signing documents in the Companies Act there were three categories within which a document made by a company could fall:

(a) contracts

(b) deeds; and

(c) “other documents”.

The fact the Court found there were different signature requirements for companies entering into contracts and deeds came as no surprise. After all, the Companies Act 2006 itself makes this clear. However, more controversially, the Court of Appeal in Hilmi said that the more rigorous signing rules in section 44 of the Companies Act 2006 apply not only to deeds but also to “other documents” to be signed “by” a company.

Signature “by” a company under section 44 involves:

(a) affixing the company seal;

(b) the signature of two directors (or a director and secretary); or

(c) (since April 2008) the signature of one director in the presence of an attesting witness.

Contrast the rules for formation of simple contracts in section 43 of the Companies Act 2006, which are easier to satisfy. Section 43 states that a company can make a contract by writing under its common seal or “on behalf of” a company by a person acting under its authority, express or implied.

The document at issue in Hilmi was a statutory notice. The company gave authority to a director to sign the notice on its behalf, and the director signed it. However, the statute governing signature and service of the notice required it to be signed “by each of the tenants … by whom it is given”. The Court of Appeal accepted that the question of whether a document must be signed “by” or “on behalf of” a company was a “somewhat metaphysical enquiry” for a corporate entity, which cannot itself hold a pen and paper. Nonetheless, the Court considered that the statutory rules meant that this notice needed to be signed “by” the company. They said that this in turn brought to bear the full requirements of section 44.

Following Hilmi, wherever statute requires a document to be signed “by” a company, you must always follow the rules in section 44 of the Companies Act 2006. This is the case even if the document is not a deed, or even an agreement. It is not enough for such a document to be signed “on behalf of” the company by a person acting with the company's authority. Fortunately, it will be rare for a statute to require signature “by” a company in this way.

It is not currently clear whether the Hilmi decision could affect other documents, which are not subject to any statutory rules, but which need to be signed “by” a company. So, for example, what if a company needs to sign and serve a notice under the terms of a contract, and that contract provides for signature of the notice “by” the company. Must the company always follow the strict rules of section 44 when signing that notice? Until we have a decision based on these facts we cannot know for sure. However, the sensible approach would be to assume that wherever a requirement exists for any document to be signed “by” a company, the full force of section 44 applies.

But is it always form over substance?

In Williams & Ors v Redcard Ltd & Ors [2011] EWCA Civ 466, the Court of Appeal took a rather less exacting view of the requirement in section 44(4) of the Companies Act 2006 for a document to be “expressed, in whatever words, to be executed by the company”.

The agreement in question had named a company and several individuals as seller. At the end of the agreement, under the rubric “Signed … Seller”, those individuals had signed. Two of them were directors of the seller company. Even though nothing suggested that those two individuals were also signing as directors of the seller company, the Court held that the requirements of section 44 were satisfied and the company had validly executed the document.

Despite the Court’s approach in this case, the final words of Lewison J’s judgment strike a cautionary note. “From a practical point of view it may just be worth stating the obvious: expensive and long drawn-out litigation about the execution of a document by a company can be avoided by taking more care over compliance with the formalities at the time of execution by, for example, adding words that expressly state the capacity in which an individual is signing a document to which a company is a party”.

Eminently sensible advice. Always spend time double checking how a document should be signed. Mistakes and short cuts can lead to expensive litigation.