Can a deed by a company be executed in counterpart in order to comply with section 44 of the Companies Act 2006?

Can a deed by a company be executed in counterpart in order to comply with section 44 of the Companies Act 2006?

Produced in partnership with Lynne Counsell of 9 Stone Buildings

Contracts and deeds

There are two types of written agreement:

• simple contracts. No particular formalities are required. There must be consideration and the limitation period is six years under section 5 of the Limitation Act 1980 (LA 1980). See: Formation and interpretation—overview.

• deeds. There is no legal definition of a deed but various formalities are required in accordance with section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 (LP(MP)A 1989) in the case of an individual. The document must be clear on its face that it is intended to be a deed and be validly executed, namely signed and witnessed and delivered as a deed. An agreement made by way of deed does not require consideration and the limitation period applicable to deeds if twelve years under LA 1980, s 8. See Practice Note: Deeds.

See generally Practice Note: Executing documents—deeds and simple contracts and Execution—overview. There is also guidance and sample attestation clauses on deeds by both individuals and companies in Gov UK—Practice Guide 8: Execution of deeds (March 2020).

Execution of deeds by a company

Section 46 of the Companies Act 2006 (CA 2006) contains the specific provisions regarding execution of deeds by a company. It provides that a document is validly executed as a deed for the purposes of LP(MP)A 1989, s 1 if it is duly executed by the company and is delivered as a deed. A document is presumed to be delivered upon it being executed unless a contrary intention is proved.

There are two methods of execution under CA 2006, s 44: affixing the common seal of the company or, by signature of its officers. The signature is either by two authorised signatories, as stated in the question, or by a director of the company in the presence of a witness who attests the signature.

Counterparts

Both simple contracts and deeds can be executed in counterpart. What this means is that each party will sign separate but identical copies of the same document which together will then form one contract or deed.

A deed will often specify that it can be executed in counterpart and the counterparts will comprise the entire deed. It might also specify that the counterparts will comprise one document. Such a clause is to the following effect:

‘This [Deed/Agreement] may be [executed/signed] in counterparts, each of which shall be deemed as original but all of which shall constitute one and the same [instrument/document].’

Summary

There is no direct authority on whether two directors of the same company can execute two separate counterparts in accordance with CA 2006, s 44(2)(a) and legal opinion is divided. However, the requirement is that the two authorised signatories must sign ‘a document’ (CA 2006, s 44). If the authorised signatories sign different counterparts, arguably, there will be non-compliance with the statutory requirements. It is, therefore, best practice for both directors to sign the same counterpart.

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