As instructed by the Companies Act of 2013, approval of signatories is a crucial component of corporate governance. Because a corporation is an artificial legal person, it has to be represented by individuals with enough power since it cannot exist and operate independently. Authorisation guarantees that contracts, statutory filings, papers, and communications signed on behalf of the company are legally binding and effective. Often bestowed by the Board of Directors in a resolution or power of attorney, such authority lets assigned officials, staff, or experts act on behalf of the corporation. However, signatories for particular objectives help to enable compliance, transparency, and effective corporate operations.
Who is an Authorised Signatory Under Companies Act, 2013?
As per the Companies Act, 2013, an authorised signatory is someone legally designated by the Board of a company. Directors should sign papers, represent the firm, and act on its behalf in legal, commercial, or regulatory matters. Papers to be attested under Section 21 of the Act may be signed by Key Managerial Personnel (KMP) or an officer so permitted by the Board in accordance with law. Usually, this penalty is done via a Board Resolution or a Power of Attorney and might be limited to some activities, like signing. Filing GST returns, managing bank accounts, signing contracts, or e-forms on the MCA portal.
Acting as the company’s agent for the particular objective, an authorised signatory is not always a director or KMP. The company is liable for its behaviour within its authorisation, but any action taken outside of that permission might expose the individual to personal accountability.
Duties and Liabilities of an Authorised Signatory
An authorised signatory under Company Law shall have to work with care, integrity, and within the bounds of his or her authority, being responsible in case of any misstatements, fraudulent acts, or misappropriation. They represent the Board, and negligence or misconduct on their part can make them liable personally under civil, criminal, and regulatory law.
Duties of an Authorised Signatory
- The authorised signatories must function within the authority delegated by the Board under a resolution or power of attorney. Any action beyond this authority may not be legally binding on the company.
- Observance of the Companies Act, 2013 should be maintained by making proper and timely filings of returns and documents to the Registrar of Companies (ROC) and other appropriate authorities.
- Maintaining accuracy of records and filings: Authorised signatories are required to ensure the accuracy of information in e-forms, resolutions, financial statements, and annual returns so that no misstatement occurs.
- Fiduciary Duty to the Company: Authorised signatories are required to maintain a duty of good faith, integrity, and diligence, as much as company officers.
- Maintaining Confidentiality: There should be strict protection of sensitive corporate information and prevention of data misuse after obtaining it while performing their official tasks.
- Effective Use of Digital Signature (DSC): DSC shall be used by authorised signatories for only company-related purposes and as per their authorised authority. Any other use can make them liable personally.
Liabilities of an Authorised Signatory
- Personal Liability for Misstatements: As provided in Section 448, the authorised signatory who furnishes a false document or statement shall be held liable personally for prosecution and penalty.
- Deceptive Behaviour: Section 447 provides liability for people who deliberately commit fraud by creating fraudulent papers or misusing their powers dishonestly. risk prison and ten-year penalties.
- Criminal and Civil Liability: Civil or criminal charges might be brought against signatories who exceed their power or breach the law.
- Joint Liability with Company: Even though the company will be bound for conduct of the authorised signatory, where the company is in default or misrepresents, the signatory may also suffer personal liability.
- Penalty for Non-Compliance: If an authorised signatory fails to comply with the requirements of the Act and no penalty is expressly provided, Section 450 shall apply, imposing a fine of ₹10,000 and ₹1,000 for each day’s continuous default.
- Apart from the Companies Act, allowed signatories might also be responsible for documents and filings in the company’s name under other legislations, including the Income Tax Act, 1961, FEMA,1999, labour laws, and banking rules; GST laws, etc.
Process of Appointment of an Authorised Signatory as per Company Law
An authorised signatory is a person appointed by a company to represent and sign on its behalf for specified purposes, such as filing documents with the Registrar of Companies (ROC), signing GST returns, dealing with banks and government authorities, or completing contractual agreements. This power is not automatically bestowed; it has to be formally delegated by the company by way of proper internal approvals and documentation.
An authorised signatory under the Companies Act, 2013 requires a Board Resolution, the issue of an authority letter or Power of Attorney (PoA), the registration of a Digital Signature Certificate (DSC) when e-files are contemplated, and proper records being maintained as stipulated by the Act and SS.1. This is based on the legal precedent that has been laid by the Companies Act, 2013.
The term “authorised signatory” has been derived from Section 179(3) of the Act, which authorises the Board of Directors to delegate certain powers by way of resolutions. The Board authorises company officers or key management personnel (KMP) for the execution of documents (Section 21). The Articles of Association (AoA) can include provisions about the delegation of powers as well.
As a result, the appointment is always supported by way of a Board Resolution.
Points to Keep in Mind:
- Only the Board of Directors can appoint someone; an individual director cannot do so unless specifically empowered by the Board in advance.
- The power can be general (for all matters related to compliance) or specific (relating to a specific transaction).
- An authorised signatory does not mean they are a director or KMP; it’s a power delegated.
- The company is responsible for its authorised signatory’s acts done within the scope of their authorisation.
Detailed Appointment Procedure:
1. Identification of Need
The company identifies the need for an authorised signatory for MCA filings, GST, EPF, ESIC, and bank account transactions.
2. Schedule a Board Meeting
Give notice to the Board Meeting as per Section 173 of the Act and Secretarial Standard-1 (SS-1). Provide a topic under agenda for the appointment of an authorised signatory.
3. Passing Board Resolution
Directors, in the meeting, authorise a designated director, company secretary, officer, or employee to sign. The resolution must mention –
- the name of the authorised signatory
- the specific powers conferred (e.g., signing, handling banks, GST, ROC returns)
- validity (permanent, transactional, or time-related).
Example:
“It is resolved that Mr. ___ (Designation) is authorised to sign and submit all such applications, forms, returns, and documents to the Registrar of Companies and other authorities on behalf of the Company under Section 21 and other sections of the Companies Act, 2013.”
4. Issue Authority Letter/Power of Attorney (if necessary)
When transacting with third parties (e.g., banks, government agencies), the company would usually give an authority letter or Power of Attorney (PoA) along with a certified true copy of the Board Resolution.
5. Filing with Authorities (where necessary)
Some positions, like GST authorized signatory and EPF digital signatory, necessitate online registration by uploading a Board Resolution/consent and associating the signatory’s Digital Signature Certificate (DSC). MCA filings authorised signatories should have registered their DSC on the MCA portal.
Consequences Of Non-Compliance
If there can be invalid paperwork, financial penalties, contractual liability, liability for fraud, and damage to the company and its officers’ reputations.
- Invalid Document Execution: According to Section 21, an authorised person or Key Managerial Person (KMP) must sign the documents necessitating authentication. Should the paper be signed by an unauthorised individual, the paperwork is ineffective and might be denied by the Registrar of Companies (ROC) or other agencies.
- Rejection of Statutory Filings: Unauthorised filings submitted on the MCA portal or other statutory websites might be refused. This causes non-filing or late filing, which draws penalties on the business and officers under the Companies Act, 2013.
- Extra fees and penalties: Failure to follow could be viewed as a violation of the Act. Section 450 says that the company and every officer in default are fined ₹10,000 and, in addition, ₹1,000 each day if the default continues.
- Fraud and Misrepresentation Sections: Under Sections 447 and 448, unauthorised document signing or filing can be regarded as misrepresentation or fraud, which draws significant consequences, including penalties and jail.
- Banking and Contractual Risks: Contracts, agreements, or banking deals entered into without due authority can be challenged as not being enforceable. This can lead to monetary losses and legal grievances for the company.
- Loss of Corporate Credibility: Frequent failure of authorisation diminishes the company’s record of compliance, decreasing its esteem before regulators, investors, bankers, and other parties of interest.
- Director/Officer Liability: Directors can become personally liable for negligence in making proper delegation of authority through Board Resolutions as mandated by Section 179(3).
Conclusion
Under the Companies Act, 2013, an authorised signature is needed to keep the legal validity and correct performance of a company’s acts, papers, and statutory obligations. Representing the company, the authorised signatory connects the legal artificial person of the company with the outside world. Perfect approval via lawyer authority or Board Resolutions guarantees responsibility, deters misuse of authority, and strengthens corporate governance. Therefore, a certified signatory is very important in protecting the legal behaviour, compliance, and transparency of a company’s business operations.
