The Ostensible Authority of a Company Secretary - Does Size Matter?

A company has no hands. It cannot write. It has no mouth. It cannot speak. Therefore, the only way a company can enter into a contract is through human intervention. But humans are not only the solution to the problem. They are also the problem to the solution. For it is always open to a company (the principal) to deny contractual liability on the basis that its agent (usually an employee) lacked the requisite authority to commit the company at the time of the contract. The issue of contractual liability for acts done by a company employee or agent is no small matter. Since the board of directors only meets several times a year, the real engine room for contracts is spread across a vast variety of designated positions within the company and the respective authority attached to each of these positions may vary greatly. One of these positions is the company secretary.1 The authority of the once humble company secretary to enter into contracts on behalf of the company has changed markedly in recent times. The company secretary has now become the second most significant individual in the corporate hierarchy regarding making contracts – surpassed only by the managing director (and in the case of a proprietary limited company, the governing director.) The company secretary's elevation in authority and importance occurred in 1971 in the English Court of Appeal decision in Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd.2 In this case, Lord Denning quoted 70 years of pre-1971 case law which supported the proposition that the authority of the company secretary is very limited.