Can I get a witness? A brief look at powers of attorney in corporate contexts
By Ahmed Mudathir and Matthew Literovich
Sometimes in a corporate document, you, as an individual will be asked to sign the document with just a line for your signature and your name underneath. Sometimes you will be asked to sign and there will be a witness line on the left opposite your signing line. Sometimes between the two will be a series of parentheticals designed to show that the two names are linked with each other. And sometimes, if the person drafting the document is really old, you get one of these little beauties:
Magnificent, isn’t she? I had to steal her from the side of a piece of sheet music and then flip it because they’re so rare. Maybe I can sell it as an NFT.
But why the discrepancy? Why do you need a witness sometimes and not others? Is there some rhyme or reason behind when lawyers add them in?
The answer is sort of. There are two big issues that make lawyers want to use witnesses in corporate contracts (though by no means the only ones):
- Powers of Attorney; and
Powers of Attorney
The power of attorney is a legal concept that lets you delegate your decision-making authority to another individual. On the one hand, they are essential to modern corporate law. A drag along to compel your minority shareholders to sell during an acquisition is a key part of corporate governance that makes sales of companies with diverse share bases possible. On the other hand, powers of attorney can be a challenging concept. The law does not like individuals being able to give up their discretion or ability to act, especially in individualistic cultures that put a primacy on the agency of an individual as a decision maker who is responsible for his or her own choice. Consequently, at times, practitioners have insisted on a witness to any signature where a person has given a power of attorney. At common law and under the Powers of Attorney Act, this isn’t a requirement, but for a continuing power of attorney under the Substitute Decisions Act, two witnesses are needed. That is likely the basis for getting a witness to sign power of attorney granting documents, though that act does not apply (often explicitly) in corporate scenarios. Powers of attorney can still be unenforceable, especially if they are not coupled with an interest (which is a separate issue), and that caveat is a semi-standard qualification to any enforceability opinion a lawyer gives, but aside from evidentiary assistance if someone ever denies signing, the witness doesn’t move the needle on enforceability.
Inertia may seem like a tongue-in-cheek answer, but it’s often a legitimate one for legal practice. We receive precedent documents that have a witness in the existing signature blocks. We copy and paste those signature blocks, with the names changed, for our new versions of the document. Other future lawyers use our documents as precedent. The chain of unnecessary witness-ship continues. No one is harmed by having a witness with their signature. It may be a bit of a headache to find one, especially during a pandemic, but that’s about where the inconvenience ends. And who wants to be the lawyer to remove a witness line from a signature block and then find out ten years later that it was the one rare case where it was needed and now you’ve been negligent. Why take the risk? Why charge the client to research if it’s fine to take away a witness signature when having it there causes no harm? Our system is not set up for us to contemplate these matters on a regular basis, unless your lawyers are nerds like us, in which case we do it for free and then write about it. As a general rule, however, signatures for individuals do not need witnesses, even when a corporate or commercial power of attorney is being granted.
If you’d like a deeper dive into this subject, we’ve set out our research in a companion piece you can find here.
And if you’d like to hire nerdy lawyers who spend time thinking about these things so you don’t have to, our contact information is linked below.
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