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ACCA Applied Skills · Corporate and Business Law (Global) · Company directors

Halden Co's board knew that Rafe, who had never been formally appointed, attended board meetings, signed contracts and was introduced to suppliers as a director. Halden never objected. Rafe signs a supply contract with Orbis Ltd, which relies on his role. What is the likely position?

Halden is likely bound because it allowed Rafe to act and be presented as a director. Holding out creates apparent authority for outsiders who rely on it in good faith. Lack of formal appointment does not protect the company, and share ownership is irrelevant.

  1. ARafe may be treated as a director by holding out, so Halden is likely bound to Orbis LtdCorrect
  2. BHalden is never bound because only formally appointed directors can bind a company
  3. CHalden is bound only if Rafe holds shares in the company

Explanation

A person held out by the company as a director, with its knowledge and acquiescence, can bind it to third parties acting in good faith under apparent authority. Formal appointment is not essential for that outcome. Share ownership is irrelevant.

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