What Is Signatory Authority: Definition, Types, and How to Get It
Signatory authority is the legal power given to an individual to sign documents on behalf of another person or an organization. It ensures that only approved people can enter into legal or financial agreements, which, in turn, prevents fraud.
In this guide, we will take a closer look at what a signatory authority involves, along with its key benefits and types, and how it differs from a power of attorney. We will also cover authorized signatory liability and the general steps to becoming an authorized signatory.
What Is Signatory Authority?
A signatory authority allows an individual to legally sign documents for another person or an organization. As a result, they can enter into agreements and approve transactions. Examples of people who can hold signatory authority include:
- Senior employees in finance
- Managers or heads of departments
- Business owners or company directors
- Legal representatives or trustees
- Government officials or agency representatives
For instance:
- A finance manager at a corporation signs off on payment agreements to guarantee timely operations.
- The head of marketing signs a contract with an advertising agency to launch a new campaign.
- A company director signs a strategic partnership agreement with another company to enter a new market.
- A trustee of a family trust signs documents to authorize the sale of trust property.
- A procurement officer at a government agency signs a service contract with a private contractor to build a new facility.
When assigning signatory authority, organizations can create a clear chain of responsibility and ensure the right people are handling critical legal and financial matters. This minimizes the risk of unauthorized actions and facilitates quicker decision-making.
An authorized signatory may be held liable if they act outside the scope of their authority or breach legal or fiduciary duties. While signing on behalf of an organization usually protects the person from personal liability, that protection still depends on them acting in good faith, within their assigned powers, and in compliance with laws and internal policies.
3 Benefits of Having a Signatory Authority
Having a signatory authority provides a clear structure for who can act on behalf of a person or organization and ensures decisions and commitments are made by the right people. It also offers the following benefits:
- Faster decision-making. Designated signatories can act without waiting for approval, which streamlines processes, especially across different sectors.
- Improved security. Restricting who can sign documents helps prevent unauthorized actions and misuse of resources. As part of best documentation practices, it also creates a clear record of who approved what.
- Reduced errors. With clear roles and responsibilities from the authorized signatory, the chances of signing mistakes or miscommunication are greatly reduced, lowering legal and financial risks.
3 Types of Signatory Authority
The three types of authorized signatories differ in terms of the level of power granted and the type of decisions being made. Distinguishing these signatory rights enables individuals, organizations, and government bodies to assign authority appropriately.
#1. Full Signatory Authority
Full signatory authority grants a person complete power to sign any legal, financial, or official document on behalf of the person or organization that they represent. Usually, it applies to high-level roles that need broad decision-making power, like CEOs and directors.
#2. Limited Signatory Authority
Limited signatory authority restricts the person's authority to specific actions, such as signing unilateral contracts below a certain dollar amount or only within a certain department. It is assigned to mid-level staff, project managers, or government officers working within specific scopes.
#3. Joint Signatory Authority
Joint signatory authority requires two or more people to sign a document together. Generally, bilateral contracts are used in nonprofit and government settings to ensure checks and balances. This signatory authority level also helps build trust in the approval process.
What Is the Difference Between a Signatory Authority and a Power of Attorney?
The difference between a signatory authority and a power of attorney is that the former is narrower in terms of scope, while the latter often has wider legal responsibility.
Typically, signatory authority is limited to signing documents within a defined role, such as for a company or government agency. It is also usually tied to a person’s role and expires when that role changes or ends.
On the other hand, a power of attorney (POA) is a broader arrangement in which the “agent” is authorized to make financial, legal, or medical decisions on behalf of the “principal.” POA is granted through a legal document and, depending on the type, can continue even if the principal becomes incapacitated.
How to Get Signatory Authority
The process for getting signatory authority varies slightly depending on the type of organization, but the steps below generally apply. These can also be followed when revoking or updating signatory validity.
#1. Read Company or Organizational Policies
Start by reading your company or organizational policies, such as bylaws, board resolutions, or procedural handbooks. These will let you know who is eligible to hold signatory authority, what documents they can sign, any monetary limits, and the required approval process.
#2. Obtain Approval From Decision-Makers
Next, obtain approval from decision-makers by submitting a formal request to your board of directors, a senior executive, or a department head. In public or nonprofit sectors, there may also be compliance requirements or procurement rules that must be followed.
#3. Get the Authority in Writing
The approval you have obtained needs to be in writing; for example, recorded in an official appointment letter, a board resolution, or similar. It serves as legal confirmation and is often required by banks, legal institutions, and auditors later down the road to validate actions taken by the authorized signatory.
#4. Notify Relevant Parties
After formal approval, you should notify all the stakeholders who rely on signature validation. This can include internal departments, external partners, and relevant government agencies. If you don’t update your stakeholders, there could be many delays and disputes.
#5. Update Legal and Banking Records
You should provide your new signatory details to the organization’s bank and update the necessary government or regulatory filings. Typically, banks require specimen signatures, copies of the authorizing document, and identity verification. This prevents unauthorized access and ensures processing is smooth.
#6. Maintain Documentation
Lastly, store all your signatory records, including copies of appointment letters, resolutions, updates, or revocations, in a secure location. Proper storage of legal documentation helps with audits, internal reviews, and disputes over who had authority at a given time.
Streamline Your Document Edits with PDF.net
After the signatory authority has been granted or changed, you will likely need to update your PDF templates for board resolutions, appointment letters, or internal approvals.
PDF.net lets you edit these directly in your browser, so you can quickly replace names, insert dates, or add digital signatures. It is a secure way to keep your paperwork accurate and up to date without needing to start from scratch.
Final Thoughts
Signatory authority plays a key role in ensuring legal, financial, and operational decisions are handled by the right people. Clearly defining who can sign what prevents confusion, unauthorized actions, and costly mistakes.
Knowing the different types of signatory authority, how to obtain them, and how they are different from a power of attorney helps you stay compliant with all relevant laws. To keep everything running smoothly, it is also just as important to maintain accurate records, and tools like PDF.net make it simple to update PDF-formatted documents as needed.
What Is Signatory Authority FAQs
#1. Who can be a signatory authority in a company?
A senior manager, department head, director, or employee formally authorized to sign documents can be the signatory authority in a company.
#2. Is a signatory authority the same as being a director?
Signatory authority is not always the same as being a director. Directors usually have signing rights, but by assigning signatory authority, other individuals can also sign documents, based on the organization's needs.
#3. How to become an authorized signatory?
To become an authorized signatory, you need formal approval from decision-makers, such as a board or manager. It must be documented in writing, and relevant parties like banks or agencies have to be notified.
#4. Does a signatory authority expire?
A signatory authority can expire due to internal policies, term limits, changes in role, changes in signatory rights, or formal revocation by the organization. Therefore, it is essential to regularly review and update signatory records.
#5. How do I verify someone’s signing authority?
To verify someone’s signing authority, request a copy of their appointment letter, board resolution, or official documentation to confirm their authority. You can also check with the organization directly or review public records if they are available.