Signing contracts as a director without personal liability

Q: When can a director be personally liable despite signing for the company?

Signing in a personal capacity. If the document names the director as the party, they are likely to be treated as one, however the signature is worded. Before the company exists. Section 51 makes a contract that purports to be made for a company not yet formed take effect as one made with the person acting for it, who is personally liable, subject to any agreement to the contrary. See pre incorporation contracts. Personal guarantees. Lenders, landlords and suppliers often ask directors to guarantee the company's obligations. Section 4 of the Statute of Frauds 1677 requires a promise to answer for the debt of another to be in writing and signed by the person to be charged, so a guarantee is a separate personal signature, often included in the same pack as the company's documents. Exceeding authority. Section 40 protects a person dealing with the company in good faith from limits on the directors' powers in the constitution, but section 40(5) says it does not affect any liability incurred by the directors by reason of exceeding their powers. Bills of exchange signed without words showing the representative capacity, as above. Other routes to personal liability that do not turn on the signature, such as reusing a liquidated company's name, are covered in when directors are personally liable.

Name the company, not yourself, as the party, using its full registered name and number, and sign with words showing you sign for and on behalf of the company in your capacity as director. A contract made this way by a director with authority binds the company under section 43 of the Companies Act 2006, and the director is not a party to it. Personal liability can still arise if you sign in your own name, sign before the company exists, give a personal guarantee, sign a bill of exchange without the right words, or act without authority.

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Why does the way a director signs make a difference?

A limited company is a separate legal person, but it can only act through people. Section 43(1)(b) of the Companies Act 2006 provides that, under the law of England and Wales or Northern Ireland, a contract may be made on behalf of a company by a person acting under its authority, express or implied. Section 43(2) adds that any formalities the law requires for a contract made by an individual also apply to one made by or on behalf of a company.

Whether the company or the individual is bound depends first on who the document says the parties are, and then on whether the signature is given on the company’s behalf. If the party clause names the director personally, or the signature gives no indication that the director is acting for a company, the other side has an argument that the individual is the contracting party. Whether the director had authority to bind the company in the first place is a separate question, covered in directors’ authority to bind the company.

What should a company signature block look like?

The parties clause should give the company’s full registered name, its registered number and its registered office, for example “Reed Joinery Ltd, a company registered in England and Wales with number 01234567, whose registered office is at …”. The signature block should then read along these lines:

Signed for and on behalf of Reed Joinery Ltd by Tom Reed, Director

This lines up with the trading disclosure rules. Under regulation 24 of the Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015, every company must disclose its registered name on, among other things, its order forms, orders for money, goods or services purporting to be signed on its behalf, and all other business correspondence and documentation. Regulation 25 requires business letters, order forms and websites also to show the part of the United Kingdom in which the company is registered, its registered number and its registered office address.

Getting this wrong has consequences for the company. Under section 83, if the company sues to enforce a contract made while it was in breach of the disclosure rules, the claim is dismissed if the defendant shows they could not pursue a claim, or suffered financial loss, because of the breach, unless the court considers it just and equitable to let the claim continue. Regulation 28 makes failure without reasonable excuse an offence by the company and every officer in default, with a fine not exceeding level 3 on the standard scale.

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Are cheques and bills of exchange different?

Yes, and the wording on them is strict. Section 26(1) of the Bills of Exchange Act 1882 says a person who signs a bill and adds words indicating that they sign for or on behalf of a principal, or in a representative character, is not personally liable on it. But the mere addition of words describing them as an agent or as filling a representative character does not exempt them. Writing “T Reed, Director” under a signature may therefore leave the signer exposed, while “for and on behalf of Reed Joinery Ltd” shows the capacity. Section 52 of the Companies Act 2006 deems a bill or promissory note to be made on behalf of a company if made in its name, or by or on behalf or on account of it, by a person acting under its authority.

When does a document need two signatures or a witness?

Most commercial contracts need only one authorised signature. Some documents must be executed by the company itself, and deeds such as many leases, guarantees and security documents fall in this group. Section 44(2) provides that a document is validly executed by a company if signed on its behalf either:

by two authorised signatories, who under section 44(3) are every director and, for a private company with a secretary, the secretary; or
by a director in the presence of a witness who attests the signature.

A document signed in either way and expressed to be executed by the company has the same effect as if sealed (section 44(4)), and in favour of a purchaser in good faith for value it is deemed duly executed if it purports to be signed in one of those ways (section 44(5)). A company with a sole director and no secretary cannot use the two signatory route, so it must use the witnessed route.

Under section 46 a company executes a deed if it is duly executed and delivered as a deed, and delivery is presumed on execution unless a contrary intention is proved. Section 1(2) of the Law of Property (Miscellaneous Provisions) Act 1989 also requires the instrument to make clear on its face that it is intended to be a deed. Where one person signs for two companies, section 44(6) says they must sign separately in each capacity. Signing deeds electronically raises its own points; see electronic signatures on company documents.

When can a director be personally liable despite signing for the company?

Signing in a personal capacity. If the document names the director as the party, they are likely to be treated as one, however the signature is worded.
Before the company exists. Section 51 makes a contract that purports to be made for a company not yet formed take effect as one made with the person acting for it, who is personally liable, subject to any agreement to the contrary. See pre incorporation contracts.
Personal guarantees. Lenders, landlords and suppliers often ask directors to guarantee the company’s obligations. Section 4 of the Statute of Frauds 1677 requires a promise to answer for the debt of another to be in writing and signed by the person to be charged, so a guarantee is a separate personal signature, often included in the same pack as the company’s documents.
Exceeding authority. Section 40 protects a person dealing with the company in good faith from limits on the directors’ powers in the constitution, but section 40(5) says it does not affect any liability incurred by the directors by reason of exceeding their powers.
Bills of exchange signed without words showing the representative capacity, as above.

Other routes to personal liability that do not turn on the signature, such as reusing a liquidated company’s name, are covered in when directors are personally liable.

How does this play out on an actual contract?

Illustration only. Tom has traded for years as a sole trader and recently incorporated Reed Joinery Ltd. A timber supplier sends a new credit account agreement generated from its old records. The parties clause reads “Tom Reed trading as Reed Joinery”. If Tom signs it as drafted, the supplier can argue the account is his personal debt, whatever he writes under his signature.

Tom asks for the parties clause to be changed to the company’s registered name and number and signs “for and on behalf of Reed Joinery Ltd, Tom Reed, Director”. The supplier’s pack also contains a personal guarantee page. Tom decides whether to give it as a separate decision, knowing that signing it makes him personally liable whatever the company’s position.

The company later takes a lease of a workshop that the landlord requires to be executed as a deed. As sole director with no secretary, Tom signs in the presence of a witness who attests his signature, in the execution block for the company, not his own name.

What mistakes do directors make when signing?

Using a trading name or brand instead of the registered company name.
Signing just a name, or a name and “Director”, with nothing showing it is for the company.
Signing a counterparty’s template that still names the director from a previous business.
Executing a deed with one director and no witness, or with a witness who was not present.
Signing once for two group companies instead of separately in each capacity.
Missing a personal guarantee clause buried in a company facility or credit application.
Signing on behalf of a company before it has been incorporated.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.