- Ensuring That a Contract Has Been Validly Executed by a Foreign Company
Notary and Partner David Few, in our Corporate team, explains the importance of obtaining a legal opinion from a solicitor or notary when entering into a commercial contract with a foreign company.
One of the advantages of operating in the Thames Valley is that over the past few years there has been a significant increase in the amount of foreign investment into the area by overseas companies.
In the context of business transactions, it is particularly important therefore that professionals should be familiar with the issues that are commonly faced so as to be sure that a foreign company has validly executed a document even if the document concerned is expressed to be governed by English Law. The issue was first considered as long ago as 1994 when regulations were introduced which are now to be found in the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009. The effect of these Regulations is that execution by a foreign company can be in any manner permitted under the law of the territory in which the Company is incorporated. However, a case from 2015 highlighted the importance of ensuring that when entering into a transaction the documents are properly executed in accordance with the law of the place of incorporation of the contracting parties and not simply by reference to the matter of the law chosen by the parties under the contract.
In the particular case in hand, the question was whether the signature of one officer of a Swiss incorporated company could bind it to a contract when under Swiss law the signatures of two such officers were required to create binding obligations on behalf of the company. The High Court held that the matter was to be determined by reference to the company’s constitution and not governed by the relevant EC Regulation applicable to contractual obligations but by reference to common law, conflict of law principles.
As a result it was determined that the issue was governed by Swiss law and since a single signature did not bind the company to the contract it had not been validly executed. The end result is that the 2009 Regulations may be viewed of limited scope in a particular set of circumstances. The Regulations allow English Courts to recognise that a foreign company has validly executed a contract even if the manner of execution would not be effective for a company incorporated under English law.
Such a case emphasises the importance of ensuring when entering into a transaction with any overseas company that the transaction documents are properly executed in accordance with the law of the place of incorporation of the contracting parties. It also emphasises the need to obtain a legal opinion from a local lawyer and preferably a notary confirming that the signatories have the requisite authority to bind the relevant party.
For further information, please contact David Few.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.