Property problems: Constitution holds key to signatory status

Q: My company leases office premises in central Auckland. In January this year, I signed an agreement to lease the premises in my capacity as director of the company. In March I received two copies of the deed of lease which I reviewed and then again signed as director of the company. The landlord's solicitors have now returned the deeds to me advising that the documents are signed incorrectly and two directors of my company must sign. The other director of the company lives in Hong Kong and it seems unreasonable to expect me to get him to sign the deed of lease. I am confused by this whole situation as the landlord's solicitors did not seem to have any issue with me signing the agreement to lease by myself. Can you tell me why they will not accept the deed of lease now?

A: The Companies Act 1993 governs the manner of execution of documentation by a company. In particular, section 180 provides that there are different requirements for the signing of agreements and signing of deeds. However, where your company has adopted a constitution document, this constitution may alter the standard provisions in the act, or may impose further requirements in relation to entering into contracts or obligations by the company.

Under the standard provisions in the act, where the company enters into an agreement, that agreement may be signed by one person acting under the company's express or implied authority. In your case, as you are a director of the company, you are authorised to enter into agreements on behalf of the company and therefore the landlord's solicitors will consider that, on the face of it, your agreement to lease has been validly signed.

However deeds have a status that elevates them above mere agreements. Where the company is to enter into a deed, the act provides that in order for that deed to be validly executed, it must be signed by two or more directors of the company. If there is only one director of the company, a deed can be signed by one director alone (as long as that director's signature is witnessed). As you have pointed out that your company has two directors, so under the act, you must ensure that deeds entered into by the company are signed by both directors.

If the landlord's solicitors are anxious to get the deed of lease completed, you could suggest that you arrange for the deed to be faxed to the second director. The second director could then sign and return the deed by facsimile. Although not an ideal form of execution of deeds, the landlord's solicitor may accept it in the interim. It is common to include a fax counterpart clause in agreements, allowing different signatories to execute the agreement in counterpart and such facsimile copies then constitute the binding document.

However, it is unlikely that the landlord's solicitors will allow faxed signatures to a deed to be held as an "original". Regardless of whether they accept a facsimile execution of the deed, the landlord's solicitors are likely to require the original of that deed signed by the second director to be forwarded to them anyway. Although it may take longer, it is probably simpler to forward the duplicate copies of the deed of lease to the second director in Hong Kong by way of international courier, for the director to sign and return to you.

As mentioned above, it may be that your company has a constitution which alters these standard provisions. Alternatively, it may be that the company has appointed an attorney to be authorised to enter into and sign such deeds.

You will need to check your company records to determine whether either of these apply to you.

Of course, if your company does not have a constitution, your second director will need to sign the deed of lease. If you envisage that this may cause problems for you in the future, it would be a good idea to consult your lawyer about having a constitution drafted, adopted by the company and registered.