Authorized officer: Overview, definition and example
What is an authorized officer?
An authorized officer is an individual designated by a company or organization to make decisions, sign contracts, or take actions on behalf of the company. The officer's authority is typically granted by the company's governing documents, such as its articles of incorporation or by the board of directors. This role can apply to various positions, such as the CEO, CFO, or other high-ranking officials, depending on the organization.
Why is an authorized officer important?
An authorized officer is important because they ensure that decisions and actions taken on behalf of the company are legally binding and in line with the company's interests. By designating specific individuals to act in this capacity, companies ensure that the right people are empowered to make critical decisions, enter into agreements, and manage the company’s obligations. This helps avoid confusion about who can represent the company and prevent unauthorized actions.
Understanding an authorized officer through an example
Imagine a business entering into a lease agreement for office space. The company’s board of directors designates the CEO as the authorized officer who can sign the lease. If the CEO signs the lease, the company is legally bound by the terms, as the CEO has the authority to do so.
In another case, a company may authorize its CFO to approve financial transactions or sign off on contracts involving a specific budget amount. The company ensures that only those with the proper authority are involved in making financial commitments or taking actions that impact the business.
Example of an authorized officer clause
Here’s how an authorized officer clause might look in a contract:
“This Agreement is executed on behalf of the Company by [Name], the duly authorized officer, whose actions are binding on the Company.”
Conclusion
An authorized officer has the legal authority to act on behalf of a company, making decisions and entering into contracts. Clearly identifying and designating authorized officers helps ensure that a company operates smoothly and avoids unauthorized actions, keeping business dealings legitimate and in line with the company’s interests.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.