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ACCA Applied Skills · Corporate and Business Law (Global) · Other company officers

Brightwell plc's company secretary, Ms Okoye, entered into a contract on the company's behalf to buy a major manufacturing plant costing several million dollars. No director had approved it. The seller had no knowledge of the lack of approval. Which statement is most accurate?

Ms Okoye probably lacks ostensible authority. A company secretary's apparent authority covers administrative matters, not major commercial or investment decisions like buying large manufacturing plant. The seller's good faith cannot enlarge the authority that the secretary's position normally carries, unless the board held her out as having it.

  1. AThe company is bound, because every company secretary has general authority to make any contract
  2. BMs Okoye is likely to lack ostensible authority, because a major trading or investment decision is beyond the administrative role of a secretaryCorrect
  3. CThe contract binds the company because the seller acted in good faith, regardless of the nature of the transaction
  4. DThe contract is valid only if the secretary is also a shareholder

Explanation

Ostensible authority of a secretary is limited to administrative matters such as employing office staff or ordering cars for the directors. Purchasing major plant is a core commercial decision outside that scope, so the secretary's position alone does not give the apparent authority. Good faith by the seller does not extend the scope of the role.

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