Delegated authority or Signing signatory? Which works better
“Authorised signatory” is one of those terms that lacks uniformity across various organisations and industries. Statement of Authority, Delegated Authority and Signing Authority are just a few of the many terminologies that companies use to define their authority delegation practices. But, as practices seem to vary widely across organisations, the meanings of these terms tend to vary too. So, what are the differences? We attempt to answer this question and shed some light on the issue in the blog below.
We recently ran a survey in the Governance, Risk and Compliance Management (GRC) group on LinkedIn to find out the most common terms used to describe authorised signatories within organisations. Interestingly, the results were equally apportioned between the terms “Signing signatory” and “Delegated authority” (41% each), reaffirming the ambiguous nature of authority delegation practices out there. So, what is the best way to define an authorised signer or signatory, and are there any differences between the various terms?
As one survey respondent pointed out, the terms used to describe authorised personnel or signatories within organisations vary wildly throughout the world. In most cases, these strongly depend on the size of the organisation and the industry.
Is there a difference between ‘Delegated authority’ and ‘Signing signatory’?
Simply put, delegation of authorities is a formal organisational process that allows staff in managerial roles to transfer their duties among their subordinates and lower-level employees. This involves delegating responsibilities along with the required level of authority to fulfil these responsibilities and maintaining accountability. Delegated authority is commonly used in the financial and insurance industries.
Similarly, an authorised signatory or signing signatory is a person who’s been given the right to sign documents and authorise transactions and processes on behalf of the authorizing organisation.
Whilst both terms are usually used interchangeably, “authorised signatories” tend to fall under a broader “Delegation of Authority Policy” that establishes an internal procedure for appointing approval and signing authority, and defining the level of scope of that authority. The policy also includes a list of general responsibilities for authorised signers to follow when reviewing, approving and processing company contracts and official documentation.
For example, many organisations restrict signature authorisation to directors or senior employees and set contract value limits applying at different seniority levels. Typical signatory duties include:
Dealing with resolutions
Signing and delivering official documents and agreements with third parties and serving as a company’s agent
Signing/authorising goods/product orders
Signing/authorising permits, passes or time-sheets
Giving any notices
Executing any specific undertakings and approvals
The need for authorised signatory standardisation
Currently, there is no formal global regulatory guidance or framework for standardised internal policies and practices for managing signing or delegated authorities. This presents a number of risks for organisations, especially those operating in highly regulated industries like financial services, including:
Risk of signature fraud
Organisations on both sides of any transaction that require signatures are exposed to a high risk of fraud. Each day that a signatory remains on your list after having left your company is a serious fraud risk opportunity. They can sign and you will not know anything about it. Why? Because you have not given your counterpart the updated list! They are just acting on their version - which is out of date.
With organisations quickly adapting to the new digital-first economy post COVID, many have now transitioned from using wet signatures to electronic or e-signatures. The use of e-signatures carries an additional risk of cybercrime, information leakages and technology failures.
Risk of non-compliance and financial scrutiny
Many organisations, especially those in the financial sector, should comply with rules and regulations for presenting documents, disclosures, and other information at certain stages during a transaction and maintaining and demonstrating an efficient financial, governance and operational environment. If organisations fail to comply, they face a risk of getting sanctioned and fined by regulatory authorities, losing accreditation status, or damaging their brand equity.
Risk of director liability
Not having a suitable authorised signatory / signer register exposes organisations to liability risk. Generally, all company directors by law have the authority to do as they please on behalf of the company, including opening and closing bank accounts.
Good governance is therefore essential to identify the most appropriate personnel to carry out tasks on behalf of an organisation to avoid any misuse. Seniority should not dictate this.
Risk of inefficiencies
In most organisations, the current process of managing authorised signatories is heavily manual which means that it is prone to human errors and inefficiency – data updates can be delayed and incorrectly implemented.
Maintaining a constantly up-to-date signatory inventory is almost impossible as employees come and go. The effectiveness of the process also highly depends on the strength of the relationship between the treasury/company secretary and HR.
Risk of delayed or failed business transactions
Inefficiently managed authorised signatory lists can result in a transaction / deal / payment getting delayed or failing completely which can further jeopardise key business and client relationships.
Having a standardised regulatory framework can significantly mitigate those risks and remove the complexities and inefficiencies associated with managing authorised signatories. Realising this, in 2021, Hong Kong’s Securities and Futures Commission (“SFC”) introduced a new regulatory mandate for the management of bank accounts within Licensed Corporations (“LCs”). For the rest of the world’s regulators to follow the SFC’s lead is just a matter of time.
How Cygnetise can help you strengthen the management of your delegated authorities or authorised signers
Cygnetise provides a digital solution as an alternative to the paper-based management and distribution of Authorised Signature Lists (ASLs). It allows you to manage all your authorised signatory and delegated authority data in a secure, cost-efficient and sustainable way, from anywhere in the world.
Without having a clear view of who your authorised signatories / delegated authorities are and who has access to your signatory data, your signatory lists might be incorrect, out-of-date, or fall into the wrong hands and thus expose you to a higher risk of security breach and fraud.
With Cygnetise, flying paper pages of sensitive signatory data and time-consuming manual processes will become a thing of the past. Operational resilience, enhanced efficiency and a contribution to your ESG goals could become the new norm.