During the course of their career, and particularly as a junior, any lawyer worth their salt will inevitably spend an inordinate amount of time checking that deeds have been properly executed. Whilst not the most thrilling part of our job, it is certainly one of the most important. But why is that?
Firstly, incorrectly executed documents cause delay and inconvenience, especially in the document-heavy construction sector – awash with Appointments, Novations, Collateral Warranties, and Reliance Letters. Once a mistake is identified each incorrectly executed document will need to be re-issued for re-execution.
Secondly, an incorrectly executed document may prejudice your ability to make claims, as explained below. If not rectified, an incorrectly executed deed may still take effect as a contract. However, the statutory limitation period for being able to bring claims under a deed is 12 years, but falls to 6 years under a simple contract.
Property defects can take years to materialise, so it’s always safer to take the time to ensure that your deed is properly executed from the outset.
The Law: what does it say?
Companies – Section 44 Companies Act 2006
In England and Wales, companies governed by the Companies Act 2006 can execute deeds in four ways:
- by affixing the common seal of the company;
- by two authorised signatories;
- by a director of the company signing in the presence of a witness; or
- by an attorney, provided that the power of attorney is executed as a deed.
Individuals – Section 3 Law of Property (Miscellaneous Provisions) Act 1989
A document is validly executed as a deed by an individual if, and only if, it is signed:
- by the individual in the presence of an independent witness; or
- at the individual’s direction and in their presence, and also in the presence of two witnesses who attest the signature.
You’d be astonished at the creative ways in which a deed can be incorrectly executed. Fortunately, as this is a blog post rather than War and Peace, we have separated the wheat from the chaff and set out a ‘greatest hits’ of execution mistakes below:
- Authorised Signatories – No, Steven from accounts (probably) isn’t an authorised signatory. Section 44(3) of the Companies Act 2006 limits the definition of authorised signatories to statutory directors and company secretaries. Therefore, if your name isn’t listed as a director and/or secretary on Companies House you can’t execute a deed as an authorised signatory on behalf of that company;
- Failure to Witness – It should go without saying, really, but in order to be a witness you really do have to physically watch the authorised signatory executing a deed with your own two eyes. In order to evidence your top-notch witnessing powers, you will also need to sign the deed where indicated underneath the authorised signatory. Make sure, to be safe, that you complete all of the details requested; and
- Powers of Attorney – Powers of attorney are often used as a means of streamlining the completion of documents; allowing non-directors, and those actually involved in the day-to-day running of a development, to execute deeds on a company’s behalf. Powers of attorney are also useful when a company isn’t based in England and Wales as it can often be impractical to ship documents abroad for execution. However, such powers are often restricted to transactions within a certain value, and sometimes can require countersigning by a second attorney. It is essential to ensure that any attorney is authorised up to the value of the transactions involved, and that the requirements of any power of attorney are complied with to the letter. As such it is necessary to provide a certified copy of the attorney to others involved in the transaction so that they can check that the appropriate authority is in place.
Executing deeds properly is a seemingly simple, but often overlooked, subject. However, if you have any concerns, your solicitors are there to help. Some top tips when executing documents on behalf of a company are to:
- always carefully check the wording of any execution block before signing. This should give you a clear indication of the execution method required; and
- ensure, before signing a deed as a statutory director or company secretary, that your position has been properly registered at Companies House.
If you would like to discuss any of the above, please do not hesitate to contact us.
This blog post was written by Trainee Solicitor Edmund Locock.