Who Can Sign for Your Company

Funding Readiness · KVasquez Law, Brickell, Miami

A majority owner assumes he can sign a note. Frequently he can. But the authority to bind a Florida limited liability company comes from its management structure and its operating agreement, not from the size of anyone's percentage, and the two diverge more often than owners expect.

This is the section of a loan file that produces the fewest arguments and the most last-minute signatures, because it is the one nobody prepares for.

Member-managed and manager-managed

Florida's Revised Limited Liability Company Act draws the line at section 605.04073. In a member-managed company, each member is an agent of the company for its ordinary business, and an act in the ordinary course binds the company unless the member lacked authority and the counterparty knew it.

In a manager-managed company the position reverses. Management is vested in the managers, and a member who is not a manager has no agency authority by virtue of being a member at all. A seventy percent owner of a manager-managed company who is not the manager cannot bind it, and his signature on a note is open to challenge by the company itself.

Which structure applies is stated in the articles of organization and the operating agreement, and it is the first thing a lender's counsel reads.

Ordinary course, and where borrowing sits

Even in a member-managed company, the statutory agency reaches acts "for apparently carrying on in the ordinary course" of the company's activities. An act outside that scope binds the company only if it was actually authorized.

Whether a seven-figure loan secured by substantially all of the company's assets is ordinary course for a business with no borrowing history is a question nobody wants litigated. Which is why lenders do not rely on the statute. They take a resolution.

What the operating agreement adds on top

The statute is the default. The operating agreement usually overrides it, and the provisions that matter are easy to miss:

• Consent thresholds for debt. Many agreements require unanimous or supermajority member approval for indebtedness above a stated amount, and the stated amount is often small relative to the company's current size because it was drafted at formation.
• Encumbrance of assets. A separate clause frequently requires consent to grant a security interest in all or substantially all of the company's property, which is exactly what a lender is asking for.
• Guaranties of third-party obligations. Often prohibited outright, which matters when an affiliate is a co-borrower.
• Officer titles with no authority behind them. Limited liability companies frequently use titles such as President or Chief Executive Officer as a courtesy. Unless the agreement or a resolution vests authority in that office, the title conveys none.
• Deadlock provisions. Two fifty-percent members with no tiebreaker and no appointed manager produce a company that cannot authorize anything without both signatures.

Corporations

For a corporation the chain is cleaner and the documents are the same. The board authorizes the borrowing by resolution or unanimous written consent, and the officers named in that resolution execute. Under section 607.0841, Florida Statutes, each officer has the authority set out in the bylaws or prescribed by the board.

The recurring problem is records rather than structure. Many closely held Florida corporations have not held a documented meeting in years, the bylaws are unsigned or missing, and the stock ledger is a spreadsheet. The authority exists; the evidence of it has to be reconstructed, and reconstructing it on a deadline is how errors enter the record.

The three documents a lender will ask for

• A borrowing resolution, or a written consent of the members, managers or directors, approving the specific loan, the collateral to be pledged, and the individuals authorized to execute. Lenders want the amount and the lender named, not a general grant.
• A certificate of incumbency, identifying each person holding office or management authority, with specimen signatures, certified by someone whose own authority is established.
• Member or shareholder consent wherever the governing document requires it, from everyone whose consent it requires, obtained before closing rather than after.

Florida also permits a limited liability company to file a statement of authority under section 605.0302, which puts a grant or a limitation of authority on the public record. It is used sparingly, and it is worth knowing it exists where a company wants to establish publicly that one manager alone can convey or encumber property.

Where it goes wrong

The signature of a member of a manager-managed company who is not the manager. A resolution signed by the same person whose authority it is supposed to establish, with nothing behind it. A consent threshold in the operating agreement that nobody read, triggered by this loan. An officer title used for years with no resolution vesting authority in it. A member who has to consent and has become unreachable, or who has a reason to be difficult.

None of these is hard to fix with time. All of them are hard to fix in the week before a closing, and the last one cannot be fixed at all without the member.

What the firm does on these matters

The work is reading the articles and the operating agreement for the management structure and every consent provision that this transaction touches, then drafting the resolution, the incumbency certificate and the consents so they are executed before the lender asks. Where the agreement is silent, inconsistent or was never signed, the fix is a restated agreement rather than a resolution papering over it.

That drafting sits in corporate and business law, the pre-application review is the Funding Readiness Review, and companies that want governance kept current rather than rebuilt each time handle it through outside general counsel. The rest of the loan file is set out in the legal documents a lender will ask for before a commercial loan.

This article is provided for general informational purposes only and does not constitute legal advice, nor does reading it create an attorney-client relationship with KVasquez Law. Statutes change and the analysis depends entirely on the governing documents in each case. Consult a qualified attorney about your circumstances before acting.