Same Director 2 companies and an agreement

[ArabianNights]

Good Morning all!
Hope all are enjoying the sunny warm weather this morning ?

If a person is a company director for 2 separate companies and one company goes into an agreement with the second company (lending the other company money) can the same person who is director of both sign the lending agreement on behalf of both companies, the one lending and the other receiving? What happens in this scenario?

Thank you!

 

[Mark T Jones]

Legally I'm guessing the answer is yes.

Though if there are other directors, it would make sense to have different signatories to demonstrate that it was overt.

In case of default, it will be interesting to see how you would comply with your statutory duty to act in the best interests of the business

 

[ArabianNights]

Legally I'm guessing the answer is yes.

Though if there are other directors, it would make sense to have different signatories to demonstrate that it was overt.

In case of default, it will be interesting to see how you would comply with your statutory duty to act in the best interests of the business

I forgot to add that company director is also an employee (on payroll) for one of the companies, but only the sole director (not an employee on payroll) for the second company.

So I assume that the employee (also director) of the company would sign in the capacity of an ‘employee’ and the director of the second company would sign under the capacity of the Director? Although both signatories are the same person? Thank you

 

[Mark T Jones]

If you are a director you take the responsibilities of a director

 

[ArabianNights]

If you are a director you take the responsibilities of a director

Thanks for that ?

 

[Newchodge]

I forgot to add that company director is also an employee (on payroll) for one of the companies, but only the sole director (not an employee on payroll) for the second company.

So I assume that the employee (also director) of the company would sign in the capacity of an ‘employee’ and the director of the second company would sign under the capacity of the Director? Although both signatories are the same person? Thank you

Only if 'employee' has the power to sign legally binding documents. I would expect them to sign as Director in both cases.

 

[ArabianNights]

Only if 'employee' has the power to sign legally binding documents. I would expect them to sign as Director in both cases.

Thank you for clarifying ?

 

[Mark T Jones]

Only if 'employee' has the power to sign legally binding documents. I would expect them to sign as Director in both cases.

I'd venture that a director choosing to sign as an employee is itself a dereliction of duty to the shareholders.

 

[ArabianNights]

I'd venture that a director choosing to sign as an employee is itself a dereliction of duty to the shareholders.

I guess that won’t be an issue, considering the shareholder is also the director ?

 

[studioJK]

Please remember that the two companies are two separate entities and they need to operate on arm's lengths. This means that if one company lends the other one money, a reasonable (market) return is expected to be received by the lending company (usually by way of interest). Otherwise, there would be other implications, such as tax.