Check who is authorised to sign and who is liable

A contract that falls through because a signatory is not authorised. You want to avoid that. If a job has been performed incorrectly, you want to know whom you can address. You can find this information in the KVK Business Register.

In the Business Register, you can find per organisation who is liable and who is authorised to sign contracts. Lawyer and entrepreneurial advisor at the KVK Advisory Team Andrée Tankink speaks daily to starters who have questions about their liability as an entrepreneur. In this article, she talks about liability per legal structure and their differences. She also explains how to arrange signing authority. 

Signing authority

Not everyone is allowed to sign a contract on behalf of an organisation. Just like performing other legal acts, such as hiring staff or making a major purchase or delivery. Sometimes signing authority is limited to, for example, only approving export documents. So, check if your business contact is authorised to sign. Have they signed contracts but were not authorised? Then your contract is invalid. 

The owner of a sole proprietorship is automatically authorised to sign. This also applies to partners of partnerships and directors of legal entities. Who may sign alone or jointly on behalf of a legal entity is stated in the articles of association. The owners or directors can also give power of attorney to other persons. For example, to an employee or family member. This allows them to sign certain contracts or documents. 

Power of attorney

Tankink explains when a power of attorney (or proxy rights) is useful: “Sometimes the person with authority to sign is absent. If someone else has a power of attorney, important actions can go ahead. This way you can arrange the continuity of your company. For example, if you are travelling, end up in a hospital or die. You can also, for example, authorise an employee to sign. One who visits customers and concludes contracts.” 

You register a power of attorney in the Business Register via kvk.nl/change. This means that the power of attorney can be found by everyone. “A company is not obliged to register a power of attorney with KVK. For example, you can also give the power of attorney to someone only once to make a major purchase for your company. You do this via a signed statement, in which you describe exactly to whom and to what action this power of attorney applies.”

Is a company going bankrupt? In that case, all authority to sign lapses and only the trustee is authorised to sign. 

Liability

An entrepreneur has to deal with liability in different ways. You can hold someone or a company liable for damage or incorrect delivery, for example. It is also possible that someone holds you or your company liable for an error. "If things go wrong with a business partner, you want to know who to turn to, and if they have any money," says Tankink. “On the other hand, you also want to know if someone can get to your assets, including your home, for example, or if this has been secured.” 

Personally liable

In legal structures without legal personality, such as sole proprietorship, general partnership and professional partnership, you as an entrepreneur are personally liable. There is no legal distinction between the company and the entrepreneur. So you are also liable with your private assets. For legal entities such as a BV or foundation that you set up via a notary deed, the 'legal entity' is liable and not the director(s) as a person. This means that a creditor can only claim the assets of the BV, and not the private assets of the entrepreneur. There are a number of situations in which a director of a legal entity is nevertheless personally liable. This is called corporate responsibility. 

Limit liability

You can limit your liability for personal legal forms. “You lay down exactly what the customer can expect from you in the general terms and conditions and in your contract. Also, ensure a safe working environment for your employees and your customers. This way you reduce the chance that someone will have to hold you liable.” With company insurance, you insure your company against company or professional liability. For example, if you accidentally damage an expensive object belonging to the customer. Or if your customer has complaints about your professional advice and asks for compensation. “The insurer expects you to have taken measures yourself to prevent damage. You can read more about this in the insurance conditions.”

Is more than one legal entity liable?

If your business partner's company is a legal entity, it is also good to know whether the company consists of several legal entities, and how they are related when it comes to administrative responsibility and liability.

At KVK, you can order the company's group structure overview. This will provide you with insight into the parent company and its subsidiaries.

Liability and authorisation per legal structure 

Who within a company is authorised to sign and who is liable varies depending on the legal form. The Business Register shows the legal form of each organisation and who is authorised to sign certain contracts and documents. You can also check this In the KVK Corporate History product.

An overview of authority to sign and liability per legal form:

Sole proprietorship

• The owner can sign.
• Liability: the owner is 100% liable with their private assets. 

General/commercial partnership (vof)

• The partners may have full, limited, or no authorisation to sign.
• The Business Register registration may contain limitations, such as: a partner is authorised to sign without involving the other partners up to a certain amount; if the amount is higher, the other partners need to co-sign.
• Liability: the partners are each fully liable with their private assets. 

Limited partnership (cv)

• If there is only one managing partner, they are authorised to sign. This is comparable to the sole proprietorship.
• If there are several managing partners in the cv, the partners may have full, limited, or no authorisation to sign – just like in a general partnership.
• Liability: the managing partners are fully liable with their private assets. The limited partners (or financial backers) are liable up to the amount of their contribution. 

Professional partnership (maatschap)

• The partners are authorised to sign on behalf of the professional partnership, if the other partners have given them power of attorney.
• The partners may have full, limited, or no authorisation to sign.
• The Business Register registration may contain limitations, such as: a partner is authorised to sign without involving the other partners up to a certain amount; if the amount is higher, the other partners need to co-sign.
• Liability: each partner is usually liable for equal parts. 

Shipping company

• The members of the shipping company are authorised to sign jointly.
• The shipping company may appoint an accountant who is authorised to sign on behalf of the shipping company, insofar as it concerns the normal operation of the vessel.
• Liability: the managing partners are fully liable with their private assets. 

Legal entities, including private and public limited company, foundation, association

• The board of directors as a whole is authorised to sign.
• Directors may be authorised jointly or severally (together or separately).
• The director who is authorised severally may sign.
• Directors who are authorised jointly must co-sign with one or more other directors. This is laid down in the articles of association (statuten). 

• Liability: the legal entity is liable, not the director who concludes an agreement on behalf of this legal entity. 

Owners' Association (Vereniging van Eigenaren, VvE) 

• Authorised to sign: The board as a whole is authorised to sign.

• Liability: The legal entity is liable, but in the event of a shortage, the members are liable in proportion to their share in the VvE. 

Cooperative or mutual insurance society

• You can deduce the liability from the letters used in the name:
  • W.A. (wettelijke aansprakelijkheid: legal liability of the members);
  • B.A. (beperkte aansprakelijkheid: limited liability of the members), and;
  • U.A. (uitgesloten aansprakelijkheid: liability excluded for members).

• Authorised to sign: The board as a whole is authorised to sign 

Foreign legal personalities

Legal entities from other countries may also be registered in the Dutch Business Register. Examples are the British Ltd and LLP, the German GmbH, French SA, or an American Delaware Corporation. There are also the European legal entities: the European Economic Interest Grouping (EEIG), the European Public Limited Company (SE), and the European Cooperative Society (SCE).

Are multiple legal entities liable?

A company with a bv legal entity is often owned by a holding company. This holding  may be personally owned by an entrepreneur or by a group of shareholders. If a holding owns several companies, you are dealing with a group of several legal entities.

If you do business with such a bv, it is important to know how these legal entities relate to each other in terms of managerial responsibility and liability. The KVK Group Structure Overview gives you insight into the parent company with its 100% subsidiaries. If the subsidiary has several shareholders, you will not find this information in the Business Register. There is not yet a central shareholders register.

UBO register

Since 27 March 2022, it is mandatory for over 1.5 million organisations to have their UBOs registered in the UBO register. UBO stands for ‘Ultimate Beneficial Owner’. This register lists the beneficial owners of non-listed organisations.