By Zurayda Mayet | Mayet & Associates

Introduction

A company speaks and acts only through people. That simple fact sits at the centre of one of the most practically important questions in commercial law: when a director puts pen to paper, has the company truly bound itself, or has an individual merely signed a document the company never sanctioned? In SACTWU Investments Group (Pty) Ltd v Sekunjalo Independent Media (Pty) Ltd and Another (915/2024) [2026] ZASCA 39 (26 March 2026), the Supreme Court of Appeal returned to that question and gave an answer that should give pause to anyone who signs a contract on the strength of the other side’s say-so.

The dispute turned on a subordination agreement signed by a single director. The director relied on a board resolution that authorised him to do what was “reasonable and necessary” to give effect to an unrelated transaction. The high court read that mandate generously and held that he had authority. The SCA disagreed. It held that the resolution conferred no authority to sign the subordination agreement at all, that the agreement was therefore not binding on the company, and that the counterparty seeking to rely on it had done nothing to satisfy itself that the authority it assumed actually existed. The financial consequence was substantial: the debtor was left exposed to a claim of roughly R458.6 million that the subordination agreement had been intended to defer indefinitely.

The judgment is not a novel statement of principle. It is something arguably more useful, a clear restatement, on commercially significant facts, of rules that practitioners and their clients too often take for granted. This article sets out the legal framework governing a director’s authority to bind a company, the facts and the path the litigation travelled, the SCA’s reasoning on both actual and ostensible authority, and the practical steps companies and counterparties should take to avoid finding themselves on either side of this outcome.

The Legal Framework: How a Company Becomes Bound

South African law does not treat a director as a walking embodiment of the company. A director holds no inherent power to bind the company to whatever agreement he or she sees fit. The board, acting collectively, is the organ in which management authority vests under the Companies Act 71 of 2008, and the authority of any individual to act for the company must be traced to a source. Broadly, that authority takes one of two forms.

Actual authority is authority the company has in fact conferred on the individual. It may be express, granted in terms, typically by a board resolution, the memorandum of incorporation, a delegation, or a power of attorney, or it may be implied, arising by necessary inference from a position the person holds or from conduct the board has sanctioned. Actual authority is a question of the internal relationship between the company and its agent. Where it exists, the company is bound whether or not the counterparty knew of it.

Ostensible (or apparent) authority is different in kind. It arises not from anything the company has actually permitted the agent to do, but from a representation by the company, by words or conduct, to the outside world that the agent has authority, on which the counterparty reasonably relies to its prejudice. It is, in substance, an estoppel. The critical feature, and the one that decides many cases, is that the representation must emanate from the company or someone the company has authorised to make it. An agent cannot clothe himself in authority by his own assertion; a counterparty who relies only on the agent’s own claim relies at its peril.

Sitting alongside these doctrines is the rule in Turquand’s case, the long-standing principle that an outsider dealing with a company in good faith is generally entitled to assume that the company’s internal procedures have been duly complied with. But Turquand protects an outsider against internal irregularities, it does not manufacture authority where none was conferred, and it does not assist a party who knows, or ought reasonably to have inquired, that the necessary authority is absent. The doctrine of constructive notice has been substantially curtailed under the 2008 Act, but that curtailment cuts both ways: it relieves counterparties of the duty to trawl public documents, while leaving firmly in place the elementary commercial discipline of verifying that the person across the table can actually commit the company.

Two further threads run through the judgment. The first is the principle that a board resolution, like any document, must be interpreted in context, having regard to its language, its purpose, and the circumstances in which it was adopted. The second is caveat subscriptor, the rule that a party is ordinarily bound by what it signs. Both featured in argument, and the way the SCA handled them is instructive.

The Facts and the Litigation

In 2013, SACTWU Investments Group (Pty) Ltd (SIG), the investment vehicle of the Southern African Clothing and Textile Workers Union, advanced a loan of R150 million to Sekunjalo Independent Media (Pty) Ltd (SIM). Over the seven-year term that followed, SIM paid no interest. By 2017, SIG had resolved to exit. The exit was to be achieved through a sale: SIG would dispose of its loan claim and its shares in SIM in exchange for shares in Sagarmatha Technologies Limited, a company that was to list on the JSE. The commercial logic was straightforward, SIG would convert a dormant loan into listed equity and walk away.

On 22 November 2017, SIG’s board passed a resolution. It approved the sale agreement and empowered any director to do, and to sign, all such things and documents “as may be reasonable and necessary” to give effect to that transaction. The sale agreement was signed the same day.

Nine days later, on 1 December 2017, a SIG director, Mr Kriel, attended at SIM’s offices and was presented with a subordination agreement. He signed it. The agreement subordinated SIG’s claim against SIM, indefinitely, until SIM’s auditors should certify the company solvent. It had never been discussed at board level. It was not mentioned in the sale agreement. It was not referred to in the November resolution. And it had not been seen or vetted by SIG’s advisors, notwithstanding that the firm’s business and investment advisor, Mr Govender, had been at the very same offices an hour earlier to review the documents for a separate transaction.

In April 2018, the Sagarmatha listing collapsed. The transaction that the November resolution had been designed to implement never completed. SIG’s loan was never transferred to Sagarmatha, and SIG remained SIM’s creditor. When SIG sued for repayment, SIM raised the subordination agreement as a shield, contending that SIG had agreed to defer its claim until SIM was certified solvent, a day that had not come.

The Western Cape Division of the High Court (O’Sullivan AJ) found for SIM on the authority question, holding that Mr Kriel had been authorised to sign the subordination agreement. SIG appealed.

The SCA’s Reasoning

Actual authority: the resolution was not an “open sesame”

The SCA’s starting point was the November resolution, and its conclusion was that the resolution simply did not extend to the subordination agreement. The mandate it conferred was tied to a single, identifiable purpose: giving effect to the sale agreement by which SIG would exit its loan via the Sagarmatha listing. The authority to sign documents “reasonable and necessary” was authority to sign documents reasonable and necessary for that purpose. It was not, in the Court’s vivid phrase, an “open sesame” permitting a director to sign any agreement he might later be handed.

Two features of the facts made that conclusion compelling. First, timing. The resolution and the sale agreement were executed on the same day, 22 November 2017. The subordination agreement materialised nine days afterwards. A document that did not yet exist, and that had never been discussed, could not have been within the board’s contemplation when it conferred the mandate. The general words of the resolution had to be read against what the board actually had in mind, and the subordination agreement was not part of it.

Second, and more fundamentally, the substance of the subordination agreement was irreconcilable with the purpose of the mandate. The entire object of the exercise was to extract SIG from its loan exposure. An open-ended subordination that locked SIG’s claim away indefinitely, and that survived even the failure of the listing, did the opposite. It deepened and entrenched the very exposure the transaction was meant to dissolve. Whatever else might be described as “reasonable and necessary” to an exit, an indefinite subordination that frustrated the exit was not. Interpreted in light of its purpose, the resolution could not be stretched to cover the agreement Mr Kriel signed. He therefore lacked actual authority.

Ostensible authority: a representation no one made

SIM’s fallback was ostensible authority, that even if Mr Kriel had not in fact been authorised, SIM was entitled to treat him as authorised and to hold SIG to the bargain. This argument failed on its own facts, and the reason is a useful illustration of how ostensible authority actually works.

Ostensible authority depends on a representation by the principal on which the counterparty relied. Here, SIM’s own representative, Mr Hove, conceded that he had never seen the November resolution. He could not, therefore, have relied on it as a representation that Mr Kriel was authorised, one cannot rely on a document one has never read. Nor was there any other conduct by SIG capable of amounting to a representation of authority. The only thing SIM had to go on was Mr Kriel’s presence and his willingness to sign, and an agent’s own conduct cannot found ostensible authority. With no representation by SIG and no reliance on any such representation, the estoppel could not get off the ground.

The point about caveat subscriptor met a similar fate. That a person is generally bound by what they sign is a rule about the signatory and the document; it does not convert an unauthorised signature into an authorised one. Mr Kriel may well have bound himself in some sense by signing, but he could not bind SIG to an obligation he had no authority to assume on its behalf.

The appeal was upheld with costs, including the costs of three counsel, the high court’s order was set aside, and the subordination agreement fell away as a defence, clearing the path for SIG to pursue repayment of a debt that, with accumulated interest, stood at approximately R458.6 million.

The Judgment in Context

It would be a mistake to file SACTWU v Sekunjalo away as a case about careless drafting. Its significance lies in the discipline it imposes on two parties at once.

For companies, it is a reminder that the resolution is the instrument through which authority is granted, and that loosely drafted resolutions create real risk in both directions. A resolution drawn so widely that it appears to authorise anything may, paradoxically, authorise very little, because a court will read it down to the purpose the board actually had in view. A resolution drawn too narrowly may leave a genuine transaction unsupported. The answer is precision: a resolution should identify the transaction, the documents, and the limits of the mandate with enough specificity that a director cannot stray beyond it and a counterparty can see exactly what has been authorised.

For counterparties, the judgment is a sharper warning still. SIM held a signed agreement and still lost, because a signature is only as good as the authority behind it. Had SIM asked to see the resolution, it would have discovered that the subordination agreement fell outside it. It did not ask. The cost of that omission was the loss of a defence worth hundreds of millions of rands. The judgment is, in this respect, continuous with a consistent line of authority: the abolition of constructive notice did not abolish commercial prudence, and a party that assumes authority rather than verifying it bears the risk if the assumption proves wrong.

Implications for Practice

Several concrete lessons follow, and they apply on both sides of the negotiating table.

Verify authority before you sign, not after. A counterparty should, as a matter of course, call for the board resolution, power of attorney, or delegation under which the signatory purports to act, and should read it against the agreement actually being signed. The question is not merely “is this person a director?” but “does this person have authority to bind the company to this agreement?” Where the resolution is general, the prudent course is to insist on a specific resolution or a confirmatory warranty of authority.

Read resolutions purposively, and draft them precisely. Broad language such as “reasonable and necessary” will be interpreted in light of the transaction the resolution was adopted to implement; it will not be treated as a free-standing licence to sign unrelated agreements. Companies should ensure their resolution templates name the transaction and the contemplated documents, and should pass fresh resolutions for materially new agreements rather than relying on an earlier, differently purposed mandate.

Do not rely on the signatory’s own assurance of authority. Ostensible authority requires a representation by the company, not by the agent. A counterparty that proceeds on the strength of the signatory’s say-so, without any representation traceable to the company, cannot later invoke ostensible authority. Reliance must be on something the principal said or did.

Build a signing protocol and use it. Companies should institute internal controls that route every document presented for signature through a check against a list of board-approved agreements, and through legal or financial advisors where appropriate, before a director signs. In SACTWU, the company’s own advisor had been on the premises an hour earlier; had the subordination agreement been put through the same review, the exposure would very likely have been avoided.

Treat caveat subscriptor as no substitute for authority. The rule that one is bound by what one signs does not cure a want of authority. A signed document executed by someone who lacked the power to bind the company is, as against the company, no contract at all.

Concluding Observations

SACTWU v Sekunjalo is a judgment about the gap between appearance and reality in corporate dealings. A director was present, a document was signed, and a counterparty assumed the company was bound. None of that was enough, because the one thing that mattered, authority to commit the company to that agreement, was missing, and no one had taken the elementary step of checking whether it existed.

The SCA’s message can be stated plainly. A director has no inherent power to bind the company; authority must be conferred, expressly or by necessary implication, and a broadly worded resolution will be read down to the purpose it was adopted to serve. For companies, the discipline lies in drafting resolutions and signing protocols that leave no room for a director to act beyond mandate. For counterparties, the discipline is older and simpler still: verify before you trust. As this case demonstrates, the price of skipping that step can run to hundreds of millions of rands.

How We Can Assist

Mayet & Associates advises companies, directors, lenders and counterparties on the corporate and commercial questions at the heart of this judgment, including the drafting of board resolutions, delegations of authority and signing protocols, the conduct of authority and due-diligence verification in commercial transactions, and disputes concerning the validity and enforceability of agreements. Our dispute resolution team litigates questions of actual and ostensible authority, contractual validity, and related defences, and as correspondent attorneys in Bloemfontein we are well placed to assist practitioners conducting appeals on these issues before the Supreme Court of Appeal. Should your matter raise any of the questions discussed in this article, please contact the firm.

Mayet & Associates · www.mayet.law

This article is provided for general information only and does not constitute legal advice. Readers should obtain specific advice in respect of their particular circumstances before acting on any of the matters discussed.