Signing Authority Delegation (Corporate Resolution)

Overview

A signing authority delegation — typically implemented as a corporate resolution — is the formal, board- or member-authorized document by which a corporation, LLC, or other business entity grants a specific officer, employee, or agent the authority to sign contracts, checks, or other binding documents on the entity's behalf, within defined limits. Why this needs to be formal, not informal: under US corporate law (which is primarily state law — each state's business corporation act or LLC act, plus the entity's own governing documents), only certain people have inherent authority to bind the entity — typically specified officers acting within the ordinary course of business, as defined by the entity's bylaws (for a corporation) or operating agreement (for an LLC), and applicable state statute. Anyone else — an employee, a manager without an officer title, an outside agent — generally needs an affirmative delegation of authority to sign on the entity's behalf, and third parties (banks, counterparties, title companies) frequently require documentary proof of that authority, in the form of a certified resolution, before accepting a signature as binding. Without this document, a signature by an unauthorized person can be challenged as not binding on the entity, creating real risk for counterparties who relied on it. Board/member authorization: this delegation should be adopted through whatever process the entity's own governing documents require — typically a resolution passed by the board of directors (for a corporation) or the members/managers (for an LLC), documented in meeting minutes or a written consent. The resolution should reference the entity's bylaws or operating agreement as the source of the underlying authority being delegated, since a delegation that conflicts with those governing documents may not be effective or may itself require an amendment to those documents first. Scope and limits: the delegation should specify precisely what the delegate may sign — a category of documents (e.g., "contracts with vendors under $50,000"), a specific transaction, or a defined class of ongoing business (e.g., "all documents necessary to open and operate bank accounts") — rather than granting unlimited signing authority by default. Dollar thresholds, subject-matter limits, and a defined time period (or indefinite, subject to revocation) are all common and advisable limiting mechanisms. Revocation: the entity should retain, and this document should state, the right to revoke the delegation at any time by a subsequent resolution, and should notify relevant third parties (banks, key counterparties) of any revocation, since a delegate's apparent authority can otherwise persist in the eyes of third parties who aren't aware it was withdrawn. When to use it: authorizing a controller, finance manager, or other non-officer employee to sign routine contracts or bank documents; authorizing outside counsel or an agent to execute specific transaction documents; or documenting authority for a newly appointed officer whose title alone may not automatically carry signing authority under the entity's bylaws. Common pitfalls: relying on informal, undocumented delegations that a bank or counterparty later refuses to honor; granting unlimited signing authority without dollar or subject-matter limits; and failing to formally revoke a delegation (and notify relevant third parties) when an employee's role changes or they leave the company.

Information to customize

• Entity name (corporation, LLC, etc.)

• Entity type

• State of formation / governing law

• Body adopting this resolution (board of directors, members, managers)

• Name of the person receiving signing authority

• Delegate's title or role

• Scope of signing authority granted (documents, dollar limits, subject matter)

• Effective date of this delegation

• Expiration date, if any (or 'until revoked')

• Date this resolution was adopted

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Frequently asked questions

Why can't an employee just sign contracts on the company's behalf without a formal delegation?

Under state corporate/LLC law and the entity's own bylaws or operating agreement, only certain officers typically have inherent authority to bind the entity in the ordinary course of business. Anyone else generally needs an affirmative, documented delegation, and third parties like banks often require proof of that authority before accepting a signature as binding.

Who has the power to adopt this kind of resolution?

It depends on the entity type and its governing documents — typically the board of directors for a corporation, or the members or managers for an LLC, acting in accordance with the entity's bylaws or operating agreement and the applicable state's business entity statute.

Should signing authority be unlimited?

It's generally advisable to limit the scope — by dollar amount, subject matter, specific transaction, or time period — rather than granting unrestricted signing authority, to reduce risk if the delegate's role changes or they leave the company.

How is a delegation revoked?

Through a subsequent resolution by the same authorizing body (board or members/managers). The entity should also notify relevant third parties, such as banks, of the revocation, since a delegate's apparent authority can otherwise persist in the eyes of third parties unaware it was withdrawn.

Does this replace the entity's bylaws or operating agreement?

No. This delegation should be adopted consistent with, and pursuant to, those governing documents — it doesn't override them, and a delegation that conflicts with the bylaws or operating agreement may not be effective.

What happens if the delegate signs outside the authorized scope?

A signature outside the scope of the delegated authority may not bind the entity, which is why the scope of authority should be defined as precisely as the business need allows.

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