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The Importance of Being a Signatory

In my time as a lawyer one of the most fundamental issues that I often see a problem with is an incorrect signature clause to a legal document. 

Many clients don't appreciate the importance of properly executing documents and many also simply don't realise that they've done it incorrectly. 

You should take comfort in the fact many get it wrong. In fact, I previously often had to review documents that were signed by finance professionals and I've lost count of the number of times I've seen them incorrectly sign. 

The first thing to remember is to make sure the right person or entity is signing. This can often be confusing, particularly when you have trusts involved in a transaction. 

There is a significant difference between signing personally and signing as trustee of a family trust so make sure you are aware of what capacity you are supposed to sign in. 

The second thing to remember is if you are signing under a company. 

Generally, if signing as a company director then a signature clause should follow the requirements of section 127 of the Corporations Act. Under section 127 a company may:

- execute documents under seal; or

- choose not to have a company seal and therefore execute documents without using a seal.

It is rare that a company uses a common seal nowadays and the execution requirements therefore are for a document to be signed by:

- two directors of the company; or

- one director and the company's company secretary; or

- if the company is a sole director company, then the company's sole director only may sign (so long as there isn't a separate company secretary).

There are other variations in signing, including when signing under a Power of Attorney. 

There may be significant ramifications for your agreement if it has not been executed properly. If in doubt feel free to contact us and we can provide you with complimentary examples of appropriate execution clauses.  

Liam Young