Corporate Matters — January 2014: directors’ actual and apparent authority to bind company

Parties to a contract need to be confident that the directors of the company they are dealing with have authority to bind the company. Authority may be ‘actual’ or ‘apparent’. What does this mean in practice and what is the position where the director has no authority?

In LNOC Ltd v Watford Association Football Club Ltd, the de facto managing director and ultimate owner of Watford, one Mr Bassini, had entered into finance agreements with LNOC on behalf of the company. When the loans were not repaid, LNOC commenced proceedings. Watford’s defence was primarily that Bassini had no authority to bind the company.

The court considered separately the issues of actual authority and apparent authority…

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