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Corporate Check Signing

 

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  Corporate Check
    Signing

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A CFO was recently ordered to pay $45,000 to a company that brought suit against him personally when the check he signed for his corporation did not clear the bank. 

This ruling is actually consistent with prior court rulings in similar cases, but many of our clients are continually caught off-guard whenever we inform them that they may indeed have personal financial responsibilities when signing corporate checks.

In this particular case, the court ruled that since the defendant signed the check as "John Hancock, CFO, John Doe Company" instead of "John Hancock as CFO for John Doe Company," he left himself exposed to personal liability.

Normally, in a case such as this, the burden would fall upon the claimant to then prove that even though the CFO left out the crucial "as" and "for" prepositions when signing the check, he had actually intended to make a personal guarantee.Proving such a claim is generally quite difficult. The claimant's case in this instance, however was helped by the fact that the CFO skipped the court hearing.  A default judgment was entered against him.  He lost on appeal and was ordered to cover the $45,000 check. 

The primary lesson to be learned from this case (aside from never skipping a court hearing) is that simply signing your name next to the name of the corporation may not shield you from personal liability.  

Local laws can vary as to the exact language required, but as a general rule, your signature should clearly state that you are signing as a representative for XYZ Company.  This general rule of course becomes critically important if the corporation is undergoing financial difficulties.

 

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