Suppose two investors open a lodge in Arusha. Their manager needs to order supplies and approve routine repairs, while the investors want oversight before the company borrows money or signs a long lease. A clear signing policy lets the manager keep the business running and gives investors a say in decisions that could commit the company for years.

When can one person sign?

Section 40 of the Companies Act allows a person to contract on behalf of a company with express or implied authority, subject to any applicable legal formalities. For formal execution, section 41(2) gives a document the same effect as one executed under the company seal if it states that the company is executing it and is signed by two directors or by a director and the company secretary. A duly executed deed takes effect on delivery. (Companies Act, Cap. 212 R.E. 2023, ss. 40–41.)

What if an internal approval is missing?

A missing approval does not automatically release the company from a commitment. Section 38 generally protects a party dealing with the company in good faith against internal limits on the board’s power to bind the company or authorise others to do so. That protection has exceptions for certain dealings involving directors and connected persons. Section 39 also says a counterparty need not investigate constitutional limits on the board’s powers. (Companies Act, ss. 38–39.)

How to set up signing authority

  • Give managers written authority for routine purchases up to a clear spending limit.
  • Specify who approves loans, guarantees and long leases, and who signs once approval is given. Align these rules with the company’s articles, any shareholders’ agreement and its bank mandates.
  • Keep minutes of board meetings. On a major deal, ask for written evidence of the other company’s signatory authority before releasing funds. (Companies Act, s. 151(1)–(2).)

This article covers Mainland Tanzania. Zanzibar has a separate Companies Act, No. 15 of 2013.

For help setting your company’s approval and signing rules, contact Aura Attorneys at Law at philip@auraattorneys.co.tz or visit www.auraattorneys.co.tz.