How Companies Can Sign Contracts in New Zealand: Authority to Bind Under the Companies Act 1993

If you’re running a business, contracts are part of everyday life. You might be signing a new supplier agreement, accepting a big customer order, leasing premises, or entering a services agreement with a contractor.

But there’s a question that can quietly cause expensive disputes later: who actually has the authority to bind a company?

In New Zealand, companies act through people. That means understanding authority (and being able to evidence it when needed) is a key part of protecting your business from day one. In this guide, we’ll break down how signing works under the Companies Act 1993, what authority to bind a company really means in practice, and how you can set up your internal processes so your contracts are enforceable and low-risk.

This article is general information only and isn’t legal advice. Authority and execution requirements can vary depending on the document, your company’s constitution, and the circumstances.

What Does “Authority To Bind A Company” Actually Mean?

When someone signs a contract “for” your company, they’re not signing in their personal capacity (at least, that’s the intention). They’re acting as an agent of the company.

Authority to bind a company is the legal power a person has to commit the company to contractual obligations. If the person signing doesn’t have authority, you can end up with messy questions like:

• Is the contract enforceable against the company?
• Can the other party walk away because the signing was invalid?
• Is the person who signed personally liable?
• Do you need to “fix” it by ratifying the contract after the fact?

From a small business perspective, this matters because you’re often moving fast. A deal gets done over email, a quote gets accepted, or a supplier pushes you to sign the same day. Getting authority right helps you avoid arguments later when something goes wrong (payment issues, delivery disputes, termination, etc.).

As a starting point, it’s also worth remembering that a contract doesn’t have to be complicated to be enforceable. The basics still matter: offer, acceptance, consideration, intention, and certainty. If you want a refresher on the building blocks, what makes a contract legally binding is a useful reference point.

How Does A Company Enter Into Contracts Under The Companies Act 1993?

Under the Companies Act 1993, a company has the legal capacity and powers of an individual, and it can enter into contracts. Practically, though, a company can only act through:

• its directors (through decisions of the board), and/or
• people the company has authorised (employees, managers, agents, attorneys), and/or
• processes set out in its constitution (if it has one).

It’s also important to be aware that the Companies Act includes statutory protections for third parties dealing with a company. In broad terms, a person dealing with a company may be able to rely on certain assumptions about the company’s internal processes and a person’s authority (for example, where someone is held out as a director or authorised agent). In practice, this can affect whether a company is bound even if internal approvals weren’t perfectly followed.

Most small companies are run by one or two directors, and authority is often informal. That can be fine day-to-day, but it becomes risky when:

• the contract is high value
• there’s a long term commitment (e.g. 3–5 year supply deal)
• there are personal guarantees, indemnities, or security interests
• you’re dealing with investors or a future business sale
• multiple people “think” they have signing power

A good constitution can reduce confusion by setting clearer rules around how decisions are made and how signing authority works. If your company doesn’t have one (or it’s outdated), a tailored Company Constitution can be a practical way to set those foundations.

Signing Vs Making The Decision To Sign

One common mix-up is assuming that the person who physically signs the contract is the person who made the decision.

In many businesses, the decision might be made by the director(s) or board, but the signing might be delegated to a manager for convenience. That’s completely normal - as long as the manager has the right authority for that type of contract.

Who Usually Has Authority To Bind A Company (And When)?

There isn’t a one-size-fits-all rule, but in practice these are the most common categories of people who may have authority to bind a company.

1) Directors

Directors are the most common “default” signatories, because directors are responsible for the management of the company (either directly or by supervising management).

For small businesses, if you’re a sole director, you’ll often be the person approving and signing agreements. If you have multiple directors, authority can depend on what the board has agreed and whether the company has a constitution with special signing rules.

Where a decision needs to be recorded formally (for example, high-value or unusual contracts), it’s often best practice to document it in a written resolution. That way, if anyone later questions the authority to bind a company, you can show that proper approval happened. A Directors Resolution can be a straightforward way to keep that paper trail.

2) Employees And Managers With Delegated Authority

Many companies delegate signing authority to operational leaders, such as:

• general managers
• operations managers
• sales managers
• finance managers (for certain banking or procurement documents)

This delegation can be done informally, but informality is where disputes start. If you want signing authority to be clear (especially for third parties), you’ll usually want something written that explains:

• who is authorised
• what they can sign
• up to what value
• whether another approval is required
• how long the authority lasts

For example, you might allow a sales manager to sign customer contracts up to $10,000, but require director sign-off above that threshold.

3) Agents Or Contractors

Some businesses use external people to negotiate or close deals (for example, a business development contractor or commission-based sales agent).

This is an area where you should be extra careful. If the relationship isn’t documented properly, you can end up with someone representing that they can bind your company when you didn’t intend that at all.

Often, the solution is to have a written agreement setting strict limits on what the agent can do, and to make sure communications with customers/suppliers don’t accidentally imply broader authority.

4) An Attorney Or Authorised Representative (Formal Authority)

For certain transactions, you may want a formal document that clearly authorises someone to sign on the company’s behalf (particularly if the director is overseas or unavailable, or the transaction needs to be completed quickly).

In practical terms, businesses often use an Authority to Act style document (or similar authorisation) so there’s no doubt about who can do what.

Types Of Authority: Actual, Implied, And Apparent (Why This Matters For Your Risk)

When lawyers talk about the authority to bind a company, they’re often talking about different “types” of authority. You don’t need to memorise these labels, but you do want to understand the risk they represent.

Actual Authority (Express Authority)

This is the cleanest situation: the company has expressly authorised the person to sign.

Examples include:

• a board resolution approving a specific contract and authorising a named person to sign it
• a written delegation policy signed by directors
• a clause in the company’s constitution setting out signing rules

Actual authority is usually the easiest to prove if there’s ever a dispute.

Implied Authority

Implied authority can arise from the person’s role and what they normally do.

For example, if someone is your “Operations Manager” and they routinely place orders with suppliers, they may have implied authority to enter into ordinary purchase orders within the usual scope of that role.

The risk is that “implied” can be argued about. What’s ordinary? What’s within scope? What’s a normal value for your business? That’s where things can get messy.

Apparent (Or Ostensible) Authority

Apparent authority is where the company’s words or conduct lead the other party to reasonably believe the person had authority, even if internally they didn’t.

This often happens unintentionally. For example:

• your director introduces someone as “handling all contracts”
• your company email signature says “Head of Procurement” and you never correct it
• you allow someone to sign multiple deals without objection
• your website or proposal documents suggest a person has authority to commit the business

From a risk management perspective, apparent authority is a big reason why you should keep your internal signing rules consistent with what you communicate externally (noting that, in some cases, third parties may also be able to rely on statutory assumptions in the Companies Act when dealing with a company).

How Should Your Company Sign Contracts In Practice?

Even where a person has authority to bind a company, you still want the signing process to be neat and enforceable.

Use Clear Signing Blocks

A common best practice is ensuring the contract makes it obvious that the person is signing for and on behalf of the company. For example:

• Company name correctly stated (matching the Companies Register)
• Signer’s full name
• Signer’s title (e.g. Director)
• Signature and date

This is particularly important for avoiding arguments that the signer agreed personally (instead of the company).

If you’re unsure about the mechanics, how to sign a contract covers practical signing tips that help reduce ambiguity.

Check Whether A Deed Or Special Form Is Required

Some documents are intended to be signed as a deed, and deeds can involve additional formality compared to standard contracts (for example, requirements around witnessing and delivery). Certain transactions may also be subject to specific execution or registration requirements under other laws.

It’s also common for banks, landlords, or larger counterparties to insist on particular signing formats (for example, requiring two signatories, specific titles, or witness signatures). These requirements are often driven by the counterparty’s internal policy and risk settings, rather than a single “standard” rule that applies to every company contract.

If the signing is incorrect, the other party may later argue the document isn’t enforceable (or refuse to complete the deal).

Don’t Forget Electronic Signing (But Use It Properly)

Electronic signing is widely used in New Zealand and can be valid, but you still need to ensure:

• the other party accepts that signing method
• the signatory is correctly identified
• you keep an audit trail (emails, platform certificate, or signing record)
• the document isn’t one that requires a specific form of execution

For many day-to-day business contracts, e-signing is practical and efficient - just make sure your internal authority rules still apply.

Keep A Simple “Signing Authority” Policy

You don’t need a 30-page manual. For most SMEs, a one-page policy (plus a director resolution adopting it) can go a long way.

It might cover:

• who can sign contracts
• what approvals are needed at each dollar value threshold
• who can sign employment-related documents
• who can approve unusual clauses (indemnities, liability caps, auto-renewals)

This becomes even more useful as you hire and delegate. If you employ staff, you’ll also want your hiring paperwork to be consistent and properly authorised (so you don’t end up with conflicting promises). Having a solid Employment Contract process is part of keeping your business protected from day one.

Common Mistakes Small Businesses Make (And How To Avoid Them)

Most contract authority problems don’t come from bad intentions - they come from moving quickly without clear guardrails.

Mistake 1: Letting “Whoever Is Available” Sign

If you’re busy, it’s tempting to ask a team member to sign something “just to get it done.” The issue is that the other party may later rely on that signature as evidence that the person had authority to bind the company.

Fix: Decide now who can sign what, and document it.

Mistake 2: Not Matching Internal Approval With External Signing

You might approve a deal verbally as a director, but the contract is signed by someone else without any written delegation. That creates a proof problem later.

Fix: For higher-risk contracts, use written approval (like a directors’ resolution) and keep it with the contract record.

Mistake 3: Forgetting The “Authority” Issue When Buying Or Selling A Business

When a business is being sold, due diligence often involves reviewing whether key contracts are valid and enforceable. If authority is unclear, a buyer may treat that as a risk (or use it to renegotiate).

Fix: Maintain clean contract files showing who signed, their role, and their authority.

Mistake 4: Assuming The Company Name Doesn’t Matter

Using a trading name instead of the legal company name can cause confusion in enforcement.

Fix: Ensure the correct company name is on the contract, and if you use a trading name, show it as “Trading As” while keeping the legal entity accurate.

Mistake 5: Relying On DIY Templates For High-Stakes Deals

Templates often don’t explain authority requirements, don’t include the right execution blocks, and may not reflect how your company actually operates.

Fix: If the deal is important, get it reviewed or drafted properly. It’s usually much cheaper than a dispute later.

And if you’re ever in doubt whether a signed document is enforceable, what makes a signed document legally binding is a good general guide - but for anything high value, tailored advice is the safest approach.

Key Takeaways

• Authority to bind a company means a person has legal power to commit the company to a contract, and getting this wrong can lead to disputes or unenforceable agreements.
• Under the Companies Act 1993, companies act through people (usually directors, or people properly authorised by directors or the company’s constitution), and third parties may also be able to rely on statutory assumptions when dealing with a company.
• Authority can be actual (expressly granted), implied (based on role), or apparent (created by what your company has represented externally), and each carries different levels of risk.
• A clear signing process includes correct company details, a clear “for and on behalf of” signing block, and internal approval records for higher-risk transactions.
• A simple written policy (supported by director resolutions where appropriate) can prevent confusion as your business grows and more people are involved in negotiating and signing deals.
• If a contract is high value, long-term, or includes tricky clauses like indemnities or limitation of liability, it’s worth getting it reviewed so you’re protected from day one.

If you’d like help setting up clear signing authority or reviewing a contract before you sign, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.