Avoid the ‘one-person risk’ and ensure that signing authority is properly secured
If only one person in a company has signing authority, their sudden absence – whether due to an accident, illness or death – can bring operations to a standstill. Without a valid signature, payments, contracts, banking transactions or submissions to the authorities may be blocked. The following brief guide will help you to avoid or quickly resolve such risks.
- Clarify immediately: Who is still authorised to act?
The first step is to check whether only a single signature is actually entered in the Commercial Register or whether there is a collective signature arrangement. The extract from the Commercial Register is decisive.
- Secure bank accounts and ongoing business
If the sole authorised signatory is unable to act, bank accounts may be frozen or transactions refused. Banks usually require an entry in the commercial register or a legally valid resolution appointing new authorised signatories.
- The board of directors must act immediately
The board of directors is obliged to ensure the company’s ability to act. It may appoint a new authorised signatory, e.g. another board member or a member of the management and arrange for the entry to be made in the commercial register.
- Entry in the Commercial Register is crucial
New signing authorisations are only legally binding vis-à-vis third parties once they have been entered in the Commercial Register.
- Contingency plan in the event of death or a vacancy on the board
If no one is left with the capacity to act, the court may, upon application, order a representative or appoint an administrator to ensure that the company regains its capacity to act.
- Prevention: Introduce dual signature authority
Companies should never be dependent on a single person. It is advisable to have at least two authorised signatories or clear rules on representation.
Conclusion:
The loss of the sole authorised signatory is a serious risk. Rapid organisational measures, prompt entry in the Commercial Register and, ideally, a forward-looking arrangement with multiple authorised signatories are crucial.