Someone from the company walks into a bank and says: “I am authorized to sign for the corporation.” The bank’s next question is predictable: “Can you show us the authority?”
This is where corporate documentation matters. A corporation acts through natural persons, but not every director, shareholder, employee, or officer automatically has authority to bind the company in every transaction. That authority needs to come from somewhere.
Two documents frequently used to establish it are the Board Resolution and the Secretary’s Certificate.
What Does a Board Resolution Do?
A Board Resolution records or reflects an action taken by the Board of Directors within its legal and corporate authority. Depending on the transaction, a resolution may deal with matters such as opening or closing a bank account, appointing authorized signatories, authorizing an officer to execute documents, entering into a material contract, applying for a government registration, approving a borrowing transaction, acquiring or disposing of assets, or appointing representatives.
But a Board Resolution is not a universal solution. Some actions may require stockholder approval, amendments to corporate documents, third-party consent, or government approval. The required authority depends on the specific transaction.
What Does a Secretary’s Certificate Do?
A Secretary’s Certificate is commonly used to certify matters appearing in the corporation’s official records. For example, the Corporate Secretary may certify that the Board approved a particular resolution and that the resolution remains effective.
Banks, government agencies, landlords, investors, and counterparties often request Secretary’s Certificates because they provide documentary evidence of corporate authority. The document is short. Its consequences can be significant.
Common Errors That Create Problems
The Wrong Corporate Name
The company’s legal name should be reproduced exactly. A missing suffix, incorrect punctuation, old corporate name, or inconsistent spelling can trigger questions from the receiving institution.
The Wrong Authorized Person
If the resolution authorizes Maria Santos but Juan Cruz signs the transaction, the document does not solve the authority problem. The names and roles must match the intended transaction.
Authority That Does Not Match the Transaction
A resolution authorizing someone to open a bank account does not necessarily authorize that person to borrow millions of pesos for the corporation. The scope of authority should be appropriate and clear.
Old or Revoked Authority
Companies sometimes reuse old Secretary’s Certificates without checking whether the officers, signatories, or underlying resolutions are still current. That can become problematic after management changes.
No Underlying Approval
A beautifully formatted Secretary’s Certificate cannot replace an approval that never actually occurred. The corporate action must first have a valid legal basis.
Notarization Does Not Create Corporate Authority
A notarized document is not automatically a valid corporate authorization simply because it bears a notarial seal. Notarization deals with the execution and acknowledgment or jurat requirements applicable to the document. Corporate authority is a separate issue.
If the required Board or stockholder approval is missing, notarization by itself does not supply that approval.
Keep Corporate Decisions Organized
The best time to document a corporate action is when it happens. Not three years later when a buyer is conducting due diligence. Not after the bank requests documents. Not when a shareholder dispute has already started.
Corporations should maintain organized records of important approvals, minutes, resolutions, Secretary’s Certificates, ownership documents, and related filings. These records help tell the legal history of the company.
How CBOS Can Help
CBOS Business Solutions Inc. assists corporations with corporate documentation, Board and stockholder resolutions, Secretary’s Certificates, regulatory submissions, and corporate housekeeping requirements.
Disclaimer: The corporate approval required for a transaction depends on applicable law, the Revised Corporation Code, the corporation’s Articles and By-laws, and the nature of the transaction. This article provides general information only.
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