When entering into a business agreement, it’s critical to ensure the person signing on behalf of the company has the legal authority to do so. Skipping this step can lead to unenforceable contracts, disputes, or even financial losses. That’s where due diligence comes in—a process to confirm that all parties are in compliance and that the deal is airtight. But what documents should you request to verify corporate authority? Let’s break it down.
1. Certificate of Incorporation or Registration
First things first: confirm that the company legally exists. The Certificate of Incorporation or Registration verifies the company’s official name and its registration under applicable laws. Without this, you might be dealing with a non-existent or fraudulent entity.
Think of this document as the company’s birth certificate—it tells you the entity is alive and legitimate.
2. Memorandum and Articles of Association
This document is the blueprint of the company’s purpose, governance structure, and operational rules. By reviewing it, you can confirm whether the company is authorized to enter into the type of agreement you’re negotiating. For example, some companies have restrictions on borrowing or engaging in certain types of business.
Pro tip: If you see something like “any decision exceeding $500,000 requires board approval,” take note—you’ll need to check for that board approval before proceeding.
3. Board Resolution Authorizing the Transaction
Even if the CEO is signing, don’t assume they have unilateral authority. In many companies, significant decisions require formal board approval. Requesting a board resolution ensures that the deal has been greenlit at the highest level. It’s essentially a green flag saying, “Yes, this is approved.”
4. List of Directors and Officers
Sometimes the person signing isn’t who you expect. A quick review of the official list of directors and officers can confirm whether the signatory is actually authorized to bind the company. This step is especially critical when dealing with new or unfamiliar entities.
5. Signature Specimen
What if the signature on the agreement doesn’t match the authorized signatory’s usual handwriting? That’s where a signature specimen comes in handy. This document lets you verify the authenticity of the signatory’s signature, ensuring you’re not dealing with forgery.
6. Power of Attorney (if applicable)
If the person signing isn’t listed as a director or officer, don’t panic—just ask for a Power of Attorney. This document delegates signing authority to someone else, often for convenience or expediency. It ensures the person has the proper authorization to act on the company’s behalf.
7. Corporate Structure Diagram
When dealing with large companies or conglomerates, figuring out who owns what can feel like solving a jigsaw puzzle. A corporate structure diagram clarifies which entity within the group you’re contracting with and confirms you’re dealing with the right party.
8. Extract from the Company’s Registry
Some jurisdictions maintain a public or semi-public registry of companies. An extract from this registry can provide valuable details, such as the names of current directors, the company’s registered address, and its operational status. It’s a fast, reliable way to cross-check the company’s information.
9. Tax Identification Number (TIN)
A company’s TIN or equivalent tax identifier shows that it’s compliant with tax regulations. It’s also a good way to verify that the company exists as a taxpayer, reducing the risk of dealing with a shell company.
10. Statement of Good Standing
In some cases, you may want extra assurance that the company is up to date with its filings and regulatory obligations. A Statement of Good Standing can confirm that the company is in full compliance with the law, making it safe to proceed with the transaction.
Why This Matters
Requesting these documents, you protect yourself from potential legal headaches down the line. Whether it’s a simple contract or a multi-million-dollar deal, verifying the signatory’s authority ensures that:
- The agreement is enforceable.
- The company is legally allowed to enter into the agreement.
- You’ve minimized the risk of fraud or non-compliance.
In summary, doing your homework now can save you from costly litigation or broken deals later. Think of these documents as the foundation of a strong and secure agreement.