Who can bind the company when a contract is signed?

A supplier of a cloud-based payroll system has spent three months negotiating with the sales manager of a mid-sized limited company. The contract runs for five years and is worth NOK 2.4 million, and the sales manager signs it with BankID on a Thursday afternoon. Six months later the company wants out. The board has never considered the matter, and the sales manager has neither signing authority nor procuration. The example is invented, but the question of whether such a contract binds the company comes up in a great many disputes.

Why is this topical?

Rett24 reported on 7 October 2026 that a law firm must repay more than NOK 700,000 in fees following a judgment of the Oslo District Court. The firm had been engaged by members of a board that the general meeting of a religious association had removed, and the fees were paid out of the association’s funds. The new board was registered in the Central Coordinating Register for Legal Entities (Enhetsregisteret). According to Rett24, the court held that those who engaged the firm could not represent the association, and that the lawyers ought to have seen the risk from the outset.

The case concerned an association, not a limited company. The law of associations in Norway is largely unwritten, while the Norwegian Private Limited Liability Companies Act (aksjeloven) has its own rules. The lesson is still the same for anyone contracting with a company or an organisation. The judgment is known only through media coverage, it has not been published on Lovdata, and it is not yet clear whether it will be appealed.

Who can bind the company under the Companies Act?

Four groups can bind a limited company. Under Companies Act § 6-30 the board represents the company externally and signs on its behalf. The board as a collective body can therefore always enter into contracts for the company, which in practice happens by the chair and one board member, or all the board members, signing after a board resolution.

Under Companies Act § 6-31 the board may give board members, the chief executive or named employees the right to sign on behalf of the company (signing authority). The articles of association may also provide for this. Signing authority may be granted to one person alone or to several jointly, and it may be revoked at any time.

Procuration (prokura) is a commercial power of attorney under the Norwegian Procuration Act (prokuraloven). Under Procuration Act § 1 the holder may act for the business in everything that relates to its operations. The exceptions are selling or mortgaging real property and acting in legal proceedings, which require express authority. Other internal restrictions cannot be invoked against a counterparty acting in good faith, see Procuration Act § 2.

The chief executive represents the company externally in matters that form part of day-to-day management, see Companies Act § 6-32.

How far does the chief executive’s authority extend?

The chief executive can bind the company in its ongoing operations, but not in matters that, given the company’s circumstances, are of an unusual nature or of major importance, see Companies Act § 6-14(2). The line is relative. A NOK 2 million contract may be routine in a group with a turnover in the billions and wholly extraordinary in a company with five employees.

Matters that typically fall outside include long-term contracts that tie the company up for many years, the purchase or sale of a business, large investments, borrowing beyond the usual limits and contracts with related parties. The chief executive may nevertheless decide such matters if the board has authorised it in the individual case, or if the board’s decision cannot be awaited without significant inconvenience to the company. The board must then be informed as soon as possible.

What happens when someone signs without authority?

It depends on whether the person had any power of representation to begin with.

If a chair, a chief executive or a person with signing authority has exceeded their authority, the contract is as a rule binding. Under Companies Act § 6-33 the company escapes only if it proves that the counterparty understood or ought to have understood that the authority was being exceeded, and that it would be contrary to fair dealing to enforce the contract. The burden of proof lies with the company. The same principle applies to instructions given to an ordinary agent under Contracts Act § 11.

If the person had no power of representation for the contract at all, the company is not bound. That is the position of the sales manager without signing authority who enters into a five-year contract far beyond anything the role supports. The company can ratify the contract afterwards, and it then becomes binding. If it does not, the counterparty is left with a claim against the person who signed.

Whoever signs for a company warrants that they have the authority to do so.

This follows from Contracts Act § 25. A person who acts as an agent without authority must compensate the loss the counterparty suffers because the contract cannot be enforced against the company. The liability lapses if the counterparty understood or ought to have understood that the authority was lacking. The claim lies against a private individual, and in practice it is often worth little to a supplier that has been delivering for six months.

What can the counterparty rely on in the Brønnøysund Register Centre?

The counterparty can rely on what is registered. Signing authority, procuration, board members and the chief executive must be registered in the Register of Business Enterprises (Foretaksregisteret) under §§ 3-2 and 3-4 of the new Register of Business Enterprises Act (foretaksregisterloven), which entered into force on 1 January 2026. Under Register of Business Enterprises Act § 7-1, what has been registered is deemed known to third parties. Conversely, matters that must be notified but have not been cannot as a rule be invoked against a third party in good faith.

And under Companies Act § 6-34, defects in the election of a board member or the appointment of a chief executive cannot be invoked against a third party after registration, unless the company proves that the third party knew of the defect. The register therefore protects the counterparty, but only as long as it is in good faith. If the supplier knows there is a dispute about who sits on the board, it helps little that the register shows something else. It was precisely the firm’s knowledge of the conflict that brought down the law firm in the Oslo District Court, where the register in any event showed the new board.

What should the counterparty check before large contracts?

The check rarely takes more than ten minutes, and it costs less than a dispute. Contracts of high value, long duration or unusual content should always go through these steps.

1. Look up the company in the Brønnøysund Register Centre and see who has signing authority and procuration, and whether signing is to be done by one person alone or by several jointly.
2. Compare the name of the person signing with the register. If they are not listed, ask for a written power of attorney from the board or from someone with signing authority.
3. Consider whether the contract is so large or unusual for this particular company that it falls outside the chief executive’s authority. If it is, ask for a copy of the board resolution.
4. Ask whether there are any disputes about the board, the ownership or the management. If you learn of any, you must take them into account, whatever the register shows.
5. Include in the contract a confirmation from the signatory that they have the necessary authority. The confirmation makes Contracts Act § 25 easier to invoke, but it does not replace the check.

What should the board and chief executive do internally?

The board should adopt an authority matrix showing who can commit the company to what, with value thresholds and a requirement for board approval of contracts above a certain duration. The matrix should match what is registered, or the very borderline cases that Companies Act § 6-33 is meant to resolve will arise.

New ways of entering into contracts do not change the rules either. When an AI agent orders goods or accepts terms, the question is still whether the company has given it authority, see AI agents and contracting and board responsibility for AI. More articles on contracting and supplier agreements can be found on the topic page on contracts.

Revoke signing authority and procuration on the same day a person leaves or steps down, and notify the Register of Business Enterprises of the change straight away. Until the change has been registered and announced, a counterparty in good faith may still rely on the old entries. Where the person leaving also holds shares, the shareholders’ agreement should determine whether, and to whom, the shares must be transferred on departure, see compulsory transfer under shareholders’ agreements.

Questions and answers

Next legal review: 31 January 2027