What authority does an Ontario director have to sign contracts on behalf of the corporation?

An individual director does not automatically have authority to bind the corporation by signing a contract, simply by virtue of being a director. Authority to execute contracts on behalf of the corporation flows from the by-laws, resolutions of the board, or from the director holding an officer role such as president or CEO to which signing authority has been delegated.

Under the Ontario Business Corporations Act, the board of directors manages or supervises the management of the corporation and can delegate authority to officers. By-laws typically set out which officers or combinations of signatories are authorized to execute contracts within stated value limits. For major contracts, board resolutions may be required before a specific person is authorized to sign.

Third parties dealing with a corporation are generally protected by the doctrine of apparent or indoor management authority — they do not need to independently verify that the person signing actually had internal authority, provided the signatory appeared to have authority given their role. However, the corporation can be protected internally by enforcing signing authority policies. Directors and officers who sign contracts beyond their authorized scope can create complications for the corporation and may be held personally accountable for any resulting losses. Establishing clear signing authority policies and maintaining them in the by-laws is an important governance step for any corporation.