Meaning
Systematic reviews confirm that officers and agents possess the requisite legal permissions to execute agreements under the company charter. A corporate authority audit examines the chain of delegation from the bylaws down to specific operational roles. This check prevents situations where a junior manager signs a multi-million dollar lease without board approval.
Power Verification
Examination of the articles of incorporation provides the foundation for determining who can sign for the entity. Every corporate authority audit maps these foundational powers against current board resolutions and powers of attorney to ensure no gap exists. This mapping reveals overlaps.
It ensures that the right hands hold the pen.
Risk Mitigation
Unauthorized signatures can lead to the cancellation of active insurance policies or the freezing of credit lines. Carrying out a corporate authority audit reduces the chance that a counterparty will challenge the validity of a signed document. It protects the company from internal fraud by establishing clear boundaries on who can move assets.
This process provides a layer of security for the board.
Transactional Security
Verification of signing rights occurs most frequently during the due diligence phase of an acquisition or a large investment round. The corporate authority audit provides the data needed for legal counsel to issue a clean opinion on the execution of deal documents. Investors require this certainty to confirm that the person signing the stock purchase agreement actually represents the company.
Law firms rely on these findings to finalize the closing binder and release the funds held in escrow.
