Board Minutes Approving a Contract
In order for a company to approve a contract, it must formally present the contract to the board for consideration and approval. If approved, the board will then authorise one or more directors to execute the contract on behalf of the company.
These board minutes record the directors’ consideration and discussion of the proposed contract as well as their decision to approve the company’s entry into the contract. Board minutes of this type are extremely important when it comes to demonstrating to their parties that a director of a company has been properly authorised to sign a contract on behalf of the company and gives the third party a degree of comfort in entering into the contract with the company.
Further details are set out below.
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In order for a company to lawfully enter into a contract, it needs to present that contract at a validly convened meeting of the board of directors. At that meeting the board must consider the terms of the contract, determine that the entry into of the contract would be in the best interests of the company and authorise one or more directors to execute that contract.
Once this authorisation has been given, a director can validly enter into a contract on behalf of the company and that contract will be binding on the company.
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