A surprising number of cross-border transactions stall not on the commercial terms but on a simpler question: can the person signing actually bind the company, and can they prove it to a notary in another country. Authority is one of those matters that seems trivial until it is not, and the not tends to arrive at completion, when a Dutch or Spanish notary declines to proceed because the powers presented are insufficient, out of date or improperly legalised.
Who can bind a company
Every company has rules about who may commit it: which directors, acting alone or jointly, and up to what limits. Those rules live in the constitution and, in many countries, in a public register. A counterparty is entitled to rely on the register, but a person purporting to act for a company must actually hold the authority they claim, and a signature by someone without it may not bind the company at all. The first question in any transaction is therefore not what is being signed but who is entitled to sign it.
Powers of attorney
Where the authorised person cannot attend, or where authority needs to be delegated, a power of attorney is used. It must be drafted to cover the specific act, granted by someone who themselves has the authority to grant it, and, for a cross-border transaction, executed in a form the receiving country will accept. A power of attorney that is too narrow does not cover the transaction; one that is too old may have lapsed; one granted by the wrong person is void. Each of these is a common and avoidable cause of delay.
Authority is invisible until a notary asks for it. The transaction that stalls at completion almost always stalls on a document that could have been prepared weeks earlier.
Legalisation and the apostille
A document executed in one country and used in another usually has to be authenticated to be accepted. For countries party to the relevant convention, this is done through an apostille, a standardised certificate that confirms the document’s origin without the fuller legalisation process required elsewhere. A power of attorney granted abroad and presented to a European notary without the apostille, or without a sworn translation where one is required, will not be accepted, and obtaining these after the fact costs days that a planned transaction does not have.
Foreign companies at the notary
When a foreign company is party to a transaction requiring a notarial deed, as many do in the Netherlands and Spain, the notary must be satisfied of the company’s existence, its current directors and the authority of the signatory. This typically requires recent corporate extracts, legalised and translated, and it is the single most common cause of delay in cross-border completions. The requirement is set out in our note on financing a Spanish asset held through a foreign company and applies wherever a foreign entity signs.
Getting it right in advance
The remedy is simple and almost always neglected: establish, early, who will sign, confirm they have authority, prepare the powers and extracts they will need, and have them apostilled and translated before completion rather than during it. A transaction that treats authority as an afterthought discovers at the notary’s office that the afterthought is a fortnight of delay. The discipline is the same one we describe for corporate records in our note on keeping a Dutch BV in good standing.
Montclare coordinates the legal architecture behind cross-border structures, working with counsel in each relevant jurisdiction to one design. Our services are set out on our services page.
This article is informational and does not constitute legal advice. The law differs by jurisdiction and the treatment of any matter depends on its facts. Each engagement is subject to scope and applicable regulation.