One director, two companies, 1 contract...

[mondeoman]

Hopefully a simple question... can someone who is a director of two companies sign a contract between those two companies, on behalf of both i.e. no-one elses signature appears on the contract?

[CambsBill]

IANAL but yes, we've done it with two companies in our group, with legal sanction

[Bigyoke]

Legally I don't think there is an issue, although context may be everything. I believe a lot of very large companies operate in a similar way, .ie BigCoffee Co. Ltd. buys its coffee from BigCoffee Co. (Coffee) Ltd., the cups from BigCoffee Co. (Cups) Ltd. and rent their premises from BigCoffee Co. (Properties) Ltd. and all these transactions would be contractual. I would imagine the rules are the same whether there one director or 20.

[4x4Tyke]

The director has a fiduciary duty to both companies, providing the best interests of both companies is served it should not be a problem. In the event of administration or some dispute, they will need to justify their actions meet their fiduciary responsibility.

[bladebloke]

mondeoman said:

Hopefully a simple question... can someone who is a director of two companies sign a contract between those two companies, on behalf of both i.e. no-one elses signature appears on the contract?

The simple answer is yes, that's fine. But they will need to sign twice.

[mondeoman]

All above board, it'd be a service supply contract, just wondered if there was an automatic conflict of interest issue. Sole director of one, joint director of the other. Could always get the second director to sign if it went ahead.

[psi310398]

Conflicts of interest arise frequently and are not "bad things" per se. The issue is how they are managed i.e.transparency, demonstration of fiduciary duty etc.

Peter

[blueg33]

rent company with a series of SPV companies to ring fence development finance on portfolios of real estate asset. There are a range of agreements from Loan Notes to development agreements. The Directors are common to all of the companies (14 in all) and individual Directors will often sign for both companies.

[Pothole]

Nothing like 2 girls 1 cup, then?

[mondeoman]

bladebloke said:

mondeoman said:

Hopefully a simple question... can someone who is a director of two companies sign a contract between those two companies, on behalf of both i.e. no-one elses signature appears on the contract?

The simple answer is yes, that's fine. But they will need to sign twice.

Damn, that's twice the workload

[bladebloke]

mondeoman said:

All above board, it'd be a service supply contract, just wondered if there was an automatic conflict of interest issue. Sole director of one, joint director of the other. Could always get the second director to sign if it went ahead.

There might be, but generally speaking directors' breaches of duty are generally only an issue if the company's shareholders make issue of it. As long as the director was authorised to execute the contract it wouldn't affect whether the contract was binding or not. If they're small 1/2 director companies then I would assume that the shareholders might well be the same people as the directors and if they are then it seems very unlikely there would be an issue - they won't sue themselves.

On the more technical company procedure points, the director might well be interested, rather than conflicted (i.e. an issue under s177 of the Companies Act rather than 175). Hopefully the articles allow in interested director to still vote and count as part of quorum at the board meeting.

BUT..... getting the other director of the second company to sign on behalf of that one would be the obvious and sensible to do, since there is one - less chance of that company challenging whether the contract binds the company if people fall out. I assumed from the question that there was only one director of each.