Last month we looked at the subject of identity fraud as regards to individuals. This article deals with the issue of dealings with companies.
Suppose an individual walks into your office and says that he/she wants to enter into and execute a contract for the purchase of land or property. How do you know that that person is authorised to act on behalf of the company?
The Corporations Act 2001 (“the Act“) allows persons dealing with companies to make certain assumptions which include:
- the company’s constitution (or replaceable rules) has been complied with,
- anyone who appears from the information held by ASIC to be a director or secretary has been duly appointed and has authority to perform the duties normally exercised by a director or secretary,
- a person who is held out by the company to be an agent or officer of the company has been duly appointed and has authority to exercise the duties normally associated with that kind of officer or agent of a similar company, and
- a document has been duly executed by the company if the document appears to have been executed in accordance with section 127 of the Act.
The final dot point is of particular relevance. Section 127 states that a document may be executed by:
- 2 directors of a company, or
- 1 director and 1 secretary of a company, or
- for a sole director of a company who is also the sole company secretary—that director.
So what does all this mean in practice? The safest way of dealing with a company in dealings with land is to first obtain an ASIC company search and then check the named officers of the company with ID of the person(s) that you are dealing with. Then you should:
- Ensure documents are executed in accordance with section 127 of the Act, or
- Ensure that the agent or officer of the company has proper written authority to act on behalf of the company.
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This update is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.