For companies or public institutions, the ability to make prompt decisions without constant executive or presidential approval is crucial.
To this end, institutions may grant signing authority to specific individuals who can make decisions on behalf of the organization.
This delegation of signatory authority is a significant responsibility that requires clear definitions and guidelines to avoid potential issues and ensure proper decision-making.
This article will provide a comprehensive understanding of signatory authority, its benefits, and practical steps to implement it effectively within your organization.
- Signatory authority grants specific individuals the power and responsibility to make legally binding decisions and sign documents on behalf of an entity.
- Signing authority primarily rests with individuals who hold significant responsibilities, such as senior executives, CFOs, and department heads.
- When drafting this type of document, the scope and limitations of signing authority must be clearly defined.
What is signature authority?
Signatory authority refers to the power and responsibility given to specific individuals within an institution or representing an entity — the entity could be a group, a company or a single person — to make legally binding decisions and sign documents on their behalf.
These individuals, often designated as authorized signatories by the board of trustees at a college or general partners at a firm, have the authority to represent the organization in various matters, such as financial transactions, contracts, agreements, grants, and official correspondence.
What are the benefits of being a signatory authority?
Signing authority grants individuals the legal authority to sign contracts, proposals, checks, and other legal documents.
This authority brings with it various benefits, such as:
Signing authority promotes swift decision-making processes, allowing key departments such as human resources to efficiently validate documents (For instance, approving employee contracts, authorizing check payments, etc.).
This streamlined approach expedites administrative tasks, ensuring prompt responses and efficient operations within the university.
Additionally, signing authority aids in mitigating the risk of fraud via unauthorized signatures.
By limiting the number of individuals with signing power, the university administration maintains control over who is authorized to sign contracts.
Individuals with signing authority are typically well-versed in the specific documents they are signing, resulting in a lower likelihood of mistakes or inaccuracies.
Who can have signatory authority?
Signing authority can be granted to anyone by the company, as long as they are authorized or empowered to do so.
Typically, individuals in important roles who frequently make decisions on behalf of the company are given signing authority. Here are a few examples.
With their decisions shaping the company’s course and success, executives often possess the authority to sign off on crucial matters.
This includes financial transactions, strategic partnerships, and crisis management.
In order to safeguard the company’s compliance with laws and regulations, lawyers representing the company must have the ability to sign legal documents on its behalf.
Having signing authority empowers department heads to oversee and handle daily operations.
For instance, the head of the logistics department can exercise control over purchases, approve them, and sign contracts with suppliers.
The different types of signature authority
Having signature authority doesn’t automatically grant individuals the unrestricted ability to sign and approve any document.
Certain conditions may require a second signature or limit the scope of authority.
Only one individual possesses the authority to sign documents on behalf of an organization.
Typically, this type of signature is reserved for high-ranking executives.
For instance, in a state university, the provost is commonly designated as the sole signatory for agreements about educational and research programs.
This status refers to a situation where a document’s validation requires two individuals’ signatures.
This signing authority is commonly used to ensure the legitimacy of purchases involving significant amounts of money.
For such situations, using a signature approval tool like PandaDoc can be highly effective.
A person with the authority to sign certain documents but not all types.
This type of authority is commonly delegated to employees who regularly engage in financial transactions, such as those in the accounting department or human resources.
Situations that require signing authority
For businesses, it is essential for executive officers to possess the ability to make prompt decisions and sign contracts on behalf of the institution.
The following is a list of documents that typically require signing authority:
Companies can provide sponsorship for university projects related to research or teaching.
It involves a legal agreement outlining the terms and conditions of the project, such as funding, objectives, and obligations.
Technology transfer programs encompass various legal agreements, such as licensing, options, etc., in order to facilitate the transfer of business-owned intellectual property such as inventions, software, copyrights, and patents.
Procurements include contracts for acquiring, leasing, and purchasing capital equipment and goods/supplies.
These agreements facilitate the process of obtaining necessary resources for the company’s operations and activities.
These refer to any document related to the acceptance of foreign employees.
Thus, persons with signing authority can validate documents related to visa sponsorship and immigration status.
Finance Related Agreements
CFOs need signature authority to sign cash management agreements, encompassing various documents related to debt, opening and closing accounts, certification, and the management of deposits.
How to give someone signing authority
The bylaws and regulations of a university, company or government institution define policy guidelines for the use of individual signatures and authorizations.
The following are the steps for developing such a document:
- Clearly define the scope of the signatory authority policy, specifying the types of documents and transactions it covers.
- Identify the positions within the entity that have signing authority, such as provost, executives, department heads, or specific roles responsible for financial transactions.
- Clearly outline any limitations or conditions associated with signing authority, including monetary thresholds, approval processes, or specific documentation requirements.
- Designate a department or individual responsible for overseeing the implementation and enforcement of the signatory authority policy.
- Include the effective date and regularly update the signatory authority policy to align with any organizational changes, legal requirements, or evolving best practices.
Use PandaDoc’s approval workflow for your documents
To sum up, signing authority refers to the power or authorization granted to individuals to sign documents on behalf of an organization.
However, individuals involved often face difficulties in the process of drafting and finalizing these documents.
The challenges are to ensure compliance with legal requirements, to accurately represent the organization’s interests, and to obtain the necessary approvals.
With document management software such as PandaDoc, you can easily track and monitor every modification made to your documents.
Reach out to us today to start your demo and experience the benefits firsthand.