What Is An Authorized Signatory (Legal Definition And Examples)

What is Authorized Signatory?

How do you legally define it?

What are the important elements you should know!

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Understanding Authorized Signatory

An authorized signatory is a person who has been given the power to sign a document, contracts, instruments, agreements or legally binding document on behalf of another person.

In most companies, authorized signatories are employees having management, director or higher roles able to bind the company.

In other words, the authorized signatories act as their employer’s agent and are able to legally bind their company.

These individuals may also be referred to as authorized signing officers or just signing officers.

Authorized Signatory definition

How do you define authorized signatory?

According to The Law Dictionary, an authorized signatory is defined as:

In essence, authorized signatories are individuals duly “authorized” to “sign” and legally act on behalf of another.

Types of authorized signatories

In different jurisdictions and industries, the phrase authorized signatory may have varying meanings.

Let’s look at the different types of individuals authorized to sign or act on behalf of another.

Company directors and officers

Every company needs one or several people to legally act on its behalf.

We call these individuals company officers and directors.

By default, they are legally authorized to act and represent the company.

As a result, they will be considered to have signatory rights and can bind the company in contracts, agreements or transact with a bank on behalf of the company.

Company employees

In addition to company directors and officers, company employees may be given signatory rights or signatory authority to act and represent the company.

In this context, the company directors and officers delegate authority to designated employees through internal company procedures.

For example, a company controller may be designated as a signatory on a bank account.

Typically, companies delegate authority to senior employees and with clear limits on the authority delegated to them.

For instance, a company may authorize an employee to specifically purchase goods and services for less than $5,000 in value.

Bank account signatories 

Bank account signatories are individuals authorized to act on behalf of a bank account holder at a specific bank.

For example, if a company deals with a local bank, it can appoint its controller as an account signatory so this person can handle the day-to-day operations of the company.

Trading authorization 

In the brokerage business, a person can be an authorized trader or agent authorized to trade shares or stock on behalf of another person.

In other words, an investor may authorize a broker or a third party to trade using his or her investment account.

The scope of authority can be modulated where you can have a broker will full trading authorization while another can have a limited trading authorization.

Signatory on bank account

When speaking of signatory authority, we may be referring to someone’s ability or authority to sign and transact with a bank.

When banks open a bank account for a person, the same individual is evidently the only signing authority.

However, what happens when a large company with many employees in its finance team has a bank account.

In that case, the company will need to designate an account signatory who is an individual working for a company but authorized to perform bank transactions. 

For instance, here is how the TrustToken answers the question what is an authorized signatory:

The signatory on a bank account can have the rights to sign cheques, access the bank account, get account balances, use the account to perform transactions, make payments, cancel payments or even close the account.

Every bank will manage the different permission levels differently.

Authorized signatures 

With an authorized signatory, the bank will take a sample of their signature so the bank can recognize the authorized signature.

The authorized signature is the signature the bank considers to be the valid and verified signature of the bank account signatory.

For a bank to ensure that the right person is acting on behalf of the account holder, they’ll generally have the authorized signatory sign a signature card where a sample of the person’s signature is kept on record.

This way, if someone signs a cheque or intends to transact with the bank, the bank has the ability to validate the signature of the cheque with the sample signature they have on record along with the signature on the person’s identification cards.

For the bank, it’s crucial to know they are effectively dealing with the account signatories to avoid fraud or losses to the bank.

Authorized signatory form

Typically, to designate someone as your authorized signatory, you’ll need to complete a form or document expressly calling out the authorization and its scope.

Here is an example of how the Lehigh University Office of Access Control handles the process of having a person formally designate another as an authorized signatory:

Takeaways 

So, what is the legal definition of Authorized Signatory?

What does authorized signature mean?

Let’s look at a summary of our findings.

Authorized Signatory:

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