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Fri 10th September, 2010
News
Regulatory Reform (Execution of Deeds and Documents) Order 2005- Execution of company deeds and documents- a new era? |
1st December 2005 |
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There are statutory rules for the execution of deeds by companies incorporated under the Companies Act. The principles of due execution of deed or document are the same as those for the execution of a document by an individual. Execution of a deed on behalf of a company rather than by the company itself requires authority from the company either by deed or by statute.
The rules on signing and execution of documents, contracts and deeds by companies were changed on 15 September 2005 when the Regulatory Reform (Execution of Deeds and Documents) Order 2005 came into force. This Order reforms the legislation governing the execution of deeds and documents in order to standardise the formal requirements for companies, corporations and individuals.
The key changes introduced by this Order are:
i) merely sealing a document will not make it a deed;
ii) third parties will be able to rely on the signatures of two directors to attest a company seal on a deed, as well as the signatures of one director and the company secretary;
iii) directors and secretaries of more than one company entering into a deed will have to sign separately for each company they represent;
iv) companies will be given the same flexibility as individuals to complete the formalities of signing a deed in advance of being bound by it;
v) third parties will be able to rely on a solicitor having authority to complete a transaction in all transactions, not just when land is being sold;
vi) companies will have power to delegate the task of execution; and
vii) third parties can rely on the attestation of companies acting as director or secretary of another company when that company executes a deed.
The Law of Property (Miscellaneous Provisions) Act 1989 provides that an instrument is not a deed unless it is clear on the face of the instrument that the parties intend it to be a deed. There has been some uncertainty about what is necessary to fulfil this requirement. Problems occur if companies execute documents – as they sometimes do - by affixing their common seal, without stating whether they intend the document to constitute a simple contract or a deed.
Every day companies enter into thousands of contracts and deeds across England and Wales. The legal rules defining when one of those documents is a deed and the consequences of it being so should be absolutely clear and simple to operate. Therefore, the new 2005 Order makes it easier for companies to determine when a document is a deed and makes clear that simply affixing a company seal will not make a document a deed. It also clarifies some Acts that are inconsistent in their definitions.
Written by Russell Mozumder |
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