Meaning
Statutory powers granted to the registered head of a corporation allow them to execute contracts and represent the entity without a separate power of attorney. Limitations on statutory legal representative authority are only effective against third parties if those parties knew or should have known of the restrictions. This legal framework provides stability for commercial transactions.
Representative Bound
Business partners can generally assume that the signature of the legal representative is sufficient to bind the company. This assumption is the foundation of statutory legal representative authority.
Corporate Liability
Companies are bound by the contracts signed by their representative even if the board of directors did not approve the transaction. However, this liability stops holding if the other party acted in bad faith or ignored obvious restrictions in the company’s articles of association. To prove bad faith, the company must show that the counterparty had actual knowledge of the limitation.
This rule places the burden of proof on the company seeking to escape the contract.
Contract Verification
Savvy buyers must always check the official registry to confirm the identity of the person claiming this power. This step ensures that the person executing the document is indeed the registered legal representative.
