A signing authority policy helps Ontario businesses prevent unauthorized contracts and reduce risk. Learn what to include and why it matters.
In many Ontario businesses, signing contracts starts off informally: the owner signs everything, or whoever is “closest to the deal” signs and moves on. That can work—until it doesn’t.
A signing authority policy is a simple internal rule-set that clarifies who is allowed to sign what on behalf of the company, and when approvals are required. It helps prevent unauthorized contracts, reduces financial risk, and keeps decision-making consistent as your business grows.
Why a Signing Authority Policy Matters
Even well-run companies can run into problems when signing authority isn’t clear. Common issues include:
- A manager signs a contract with terms the owner didn’t approve
- Someone agrees to an auto-renewing service that’s hard to cancel
- A lease, loan, or vendor agreement is signed without the right internal sign-off
- Two people sign conflicting commitments with different suppliers
- The company gets pulled into disputes because “someone said yes” in writing
A policy won’t prevent every problem, but it makes expectations clear—and creates a paper trail showing the company took reasonable steps to manage risk.
What Your Signing Authority Policy Should Include
A good policy is short, practical, and tailored to how your business actually operates. Most include:
1. Who has authority (by role, not name)
For example: President, CFO, Operations Manager, etc. This makes it easier to maintain as people change.
2. Spending and contract thresholds
Set dollar limits for different categories, such as:
- Up to $5,000: Department Manager
- $5,001–$25,000: Director approval required
- Over $25,000: Officer/Owner approval required
(Your thresholds will depend on your business.)
3. “Always escalates” contract types
Some agreements should always go to senior approval (and often legal review), like:
- Commercial leases
- Loans, guarantees, and financing documents
- Long-term contracts (multi-year terms)
- Agreements with exclusivity, non-competes, or big termination penalties
- Anything involving shares, ownership, or major assets
4. Required internal approvals
Spell out what must happen before signing—budget approval, board/owner sign-off, or legal review.
5. How signing happens (process rules)
Examples:
- No one signs without a final copy (no “draft signatures”)
- Use a single contract repository (one place to store signed agreements)
- E-signatures are allowed only through approved tools
- Two-signature requirement for certain contracts (if appropriate)
Quick Reality Check: “Authority” Isn’t Just a Signature
Even emails, texts, and purchase orders can create obligations. A good policy reminds staff not to “agree” to contract terms in writing unless they’re authorized to do so.
Need Help Setting This Up?
If you need legal advice, please reach out to Boardwalk Law – our team is here to help. Contact Associate Lawyer Brian M. Murphy or learn more about our Corporate Law services.