What is an authorized signatory?
Simply put, an authorized signatory or signer is a person who’s been given the right to sign documents on behalf of the authorizing organisation. However, the term’s meaning and interpretation seem to vary significantly across different jurisdictions and industries. So, in today’s blog, we’ve put together an overview of some of the most common uses of the term.
Company signature authorization
Designated officers/employees within an organisation who are authorized to process and approve official documents and third-party agreements on behalf of the organisation are often referred to as “authorized signers”.
The process of signature authorization usually forms part of a broader “Delegation of Authority Policy” that establishes an internal procedure for appointing approval and signing authority, and defining the level of scope of that authority. The policy also includes a list of general responsibilities for authorized signers to follow when reviewing, approving and processing company contracts and official documentation.
For example, many organisations restrict signature authorization to directors or senior employees and set contract value limits applying at different seniority levels. Typical signatory duties include:
Dealing with resolutions
Signing and delivering official documents and agreements with third parties and serving as a company’s agent
Signing/authorizing goods/product orders
Signing/authorizing permits, passes or time-sheets
Giving any notices
Executing any specific undertakings and approvals
Authorized signers on bank accounts
In banking, personal and business account holders can authorize someone else to manage their account. These people are also usually called authorized signatories. Many banks require account holders to be recognised as authorized signatories, too.
In terms of level of authority, authorized signers usually have the same access to the bank account as the account holder.
In business banking, however, the rights of authorized signers tend to differ across various jurisdictions and depend on local government’s specific legislations. Some of the most common types of permissions held by authorized signers on business accounts are:
Ability to sign checks/cheques
Access to an account’s balance
Access to transactions history
Ability to cancel payments on checks/cheques
Ability to close the account
In the US, there’re also specific rules for authorized signers on business accounts owned by limited liability companies (LLCs). Although an authorized signer is allowed to do business in the same way as the owner of the bank account (the LLC), he/she doesn’t have the same legal responsibilities as account holders. This requires a highly trusted individual to be designated as the second authorized signer on an LLC business bank account. Legally, an authorized signer is permitted to make financial transactions from the account such as spending or approving company funds.
Signature authority can be given by an LLC to one or more individuals for all legal and financial documents or rights can be approved for only certain accounts or transactions. Moreover, sometimes different roles have the permission to sign off on specific paperwork. For example, a managing director or LLC president may be the authorized signer for the following documentation:
Loan documents
Partnership agreements
Contracts
Whereas, the CEO of the LLC may have the authority to sign off on other documents, such as:
Loans
Checks/cheques
Any other finance-related paperwork
In personal banking, individual authorized signatories can usually use an account separately if the mandate says “several”, “any” or “either” authorized signatory can sign (that is, operate the account).
Otherwise, if a mandate requires “joint”, “both” or “all” (or in some cases “any two”) authorized signatories to sign or access the account together, it means that one authorized signatory alone cannot use the account. Other authorized signatories must also authorize the transactions. A bank cannot allow transactions or other activity without the consent of the other holders.
Trading authorization on investment accounts
In brokerage, authorized traders refer to brokers or agents who are permitted to trade on behalf of the investor/client. In other words, trading authorization allows an investor to grant a certain level of authority to a third party for the purpose of trading on a designated trading account. This usually happens when an individual person decides to appoint a financial professional to receive financial advice.
Generally, there’re two types of trading authorization levels: full trading authorization and limited trading authorization. To establish the level of trading authorization, the primary account holder is usually required to consent to the authorization through an official formal document or contract.
