Changing Bank Signatories - Simple Yet Important


Every company inevitably will set up at least one corporate bank account for purpose of managing its business finances including assets, cash flows and expenses. It is important that corporate bank accounts are managed and operated properly.

Even more importantly, nobody should be allowed or be given the opportunity to abuse their authority in operating the corporate bank accounts, hence resulting in misappropriation of funds.
 
WHO IS AUTHORISED?

At the point of opening the corporate bank account, the Directors of your Company would have passed a Board resolution to approve the opening of bank account. At the same time, authorised bank signatories would have been appointed to operate the corporate bank account within specified authorisation limits. This means that the list of authorised bank signatories, authorisation limits and requirements are set out in the Board resolution and approved by the Directors of your Company in accordance with your Company’s Constitution.

Typically, authorised bank signatories are Directors of the Company. You can also include other officers or trusted employees of your Company as authorised bank signatories.
 
HOW TO EFFECT CHANGES IN BANK MANDATE

Subsequently, if you want to make changes to your Company’s bank mandate in terms of adding or deleting authorised bank signatories or amending the authorisation limits and requirements, you will need to inform the bank.

Depending on the bank you deal with, such changes may be effected by submitting to the bank: -

  1. The relevant corporate banking form duly signed by authorised persons; and/or
  2. A certified extract of Board resolution duly signed by a Director and Company Secretary or two Directors.

It is observed that certain banks only require submission of corporate banking form to facilitate the process of updating the bank mandate. Such forms usually require one or two authorised signatories to sign off as per your existing bank mandate.

What might be easily overlooked is that this form might be submitted to the bank without the Board’s approval, especially if your Company’s bank mandate does not require approval from any or majority of the Directors.

WHAT SHOULD BE DONE?

Below are a few typical scenarios: -

 Scenario What Should Be Done
Bank only requires submission of corporate banking form.
  • Pass a formal Board resolution in accordance with your Company’s Constitution to approve the submission of corporate banking form.
  • Include the corporate banking form as an annexure to the Board resolution.
Bank accepts certified extract of Board resolution.
  • Pass a formal Board resolution in accordance with your Company’s Constitution to (i) supersede previous instructions and (ii) set out the revised list of authorised bank signatories, authorisation limits and requirements.
  • Arrange for certified extract of the Board resolution to be signed by a Director and Company Secretary or two Directors of your Company.
Bank requires submission of both corporate banking form and certified extract of Board resolution.
  • Pass a formal Board resolution in accordance with your Company’s Constitution to (i) supersede previous instructions, (ii) set out the revised list of authorised bank signatories, authorisation limits and requirements and (iii) approve the submission of corporate banking form.
  • Include the corporate banking form as an annexure to the Board resolution.
  • Arrange for certified extract of the Board resolution to be signed by a Director and Company Secretary or two Directors of your Company.

IMPORTANT NOTE 

Managing your Company's bank accounts is not difficult. What is difficult is to ensure that nobody abuses their authority in operating the bank accounts, thereby resulting in misappropriation of funds.

It is always a fine balance between operational efficiency and compliance. Whatever your Company's bank mandate is, you want to ensure that authorised bank signatories are trusted to safeguard your Company's assets. You also want to ensure that the authorisation limits are not too restrictive and yet not too liberal to invite dishonesty.

You should never allow a situation where authorised signatories, who are deemed as trusted employees of your Company, be given the opportunities to make transactions which have not been authorised by the Board. Hence, whatever bank mandate your Company has decided or amended, please keep the Board of Directors of your Company informed. As mentioned above, this is usually done by passing a Board resolution.

If you need help in preparing the Board resolution, you may wish to check out our e-shop when you click on the category – Change of Bank Signatories.


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