The Management's Dispositions on Behalf of the Company: Signature Rules, Powers of Attorney and Procuration

Kasper Dyhr Øelund

Student thesis: Master thesis


This thesis considers the powers that a company can grant a member of its management to act on behalf of the company and bind it towards third parties, and how this effects the parties’ strategic decisions. The powers granted to the management through the rules of signature generally give them the authority to bind the company in every respect towards a third party. The powers of attorney – primarily through a general authority – give the executive management the powers to bind the company within the scope of its position. These powers are less comprehensive than the powers by rules of signature but still allows the concerned executive manager to bind the company to a certain extend. The rules are characterised by being more flexible but consequently more difficult to assess the extent of. Thirdly, persons can be granted powers of procuration which are similar to those of the general authority, but slightly less comprehensive. The assessment of whether the company is bound by the management’s dispositions is generally based on whether the concerned manager acts within his authorisation, and if not, whether the third party knew or should have known of this. The assessment of whether the third party should have known is predominantly based on whether there are any circumstances that give the third party reason to believe that the manger acted outside his authority. This assessment is largely based on the extent of the powers in question. The extent of the powers transcends onto the strategic considerations of the company owners, the management and the third parties, in a setting where company owners are to choose between powers by signature rules and general authority. In a situation where the powers by rules of signature provides little possibility of making an unwanted agreement void and with an increased risk connected to the extent of these powers, a general authority is preferable. The preference between powers by rules of signature and general authority is primarily affected by the risk of an unwanted agreement being declared void, the risk connected to the extent of the concerned powers, and the inclusion of transaction costs in the setting.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2016
Number of pages81
SupervisorsTroels Michael Lilja & Caspar Rose