Authority To Speak.
. Meaning of “Authority to Speak”
Authority to speak refers to the legal and organisational power of an individual to make statements, representations, or disclosures on behalf of a company or institution, such that those statements bind the organisation legally or commercially.
In corporate law, this authority may be:
Actual authority (express or implied)
Apparent or ostensible authority
Statutory authority (conferred by law or regulation)
2. Legal Importance of Authority to Speak
Statements made by an unauthorised person may:
Expose the company to unintended legal liability
Mislead investors or stakeholders
Lead to regulatory sanctions
Result in personal liability for the speaker
Courts often treat authorised spokespersons as the “mind and will” of the company.
3. Types of Authority to Speak
(a) Express Authority
Formally granted through:
Board resolutions
Articles of Association
Employment contracts
(b) Implied Authority
Arises from position or conduct (e.g., Managing Director, CEO).
(c) Apparent / Ostensible Authority
When a company holds out a person as authorised, even if no actual authority exists.
(d) Statutory Authority
Conferred under statutes such as:
Companies Act, 2013
SEBI Regulations
4. Risks Associated with Lack of Authority
Unauthorised disclosures
Market manipulation
Misrepresentation
Defamation
Breach of fiduciary duties
Even unauthorised statements may bind the company if third parties reasonably rely on them.
5. Statutory and Regulatory Framework (India)
Companies Act, 2013 – Sections 166, 179
SEBI (LODR) Regulations, 2015
SEBI Act, 1992
Contract Act, 1872 – Agency principles
6. Important Case Laws (At Least Six)
1. Hely-Hutchinson v. Brayhead Ltd. (1968)
The Court recognised implied actual authority arising from conduct and position.
Principle:
Senior executives may have authority to speak even without express delegation.
2. Freeman & Lockyer v. Buckhurst Park Properties (1964)
The Court established the doctrine of apparent (ostensible) authority.
Principle:
If a company represents someone as authorised, it is bound by their statements.
3. Royal British Bank v. Turquand (1856)
The “indoor management rule” protects outsiders dealing in good faith.
Principle:
Third parties may rely on apparent authority to speak.
4. Lennard’s Carrying Co. v. Asiatic Petroleum Co. (1915)
The Court identified the concept of the “directing mind and will” of a company.
Principle:
Statements of senior management can be treated as those of the company itself.
5. Meridian Global Funds Management Asia Ltd. v. Securities Commission (1995)
The Privy Council held that attribution of acts and knowledge depends on context and statute.
Principle:
Authority to speak is determined by statutory purpose and corporate structure.
6. N. Narayanan v. Adjudicating Officer, SEBI (2013)
The Supreme Court held directors and officers personally liable for misleading disclosures.
Principle:
Those authorised to speak carry enhanced responsibility and accountability.
7. SEBI v. Shri Ram Mutual Fund (2006)
The Supreme Court held that mens rea is not required for regulatory penalties.
Principle:
Even negligent or unauthorised statements can attract liability.
7. Authority to Speak vs Personal Speech
A critical distinction exists between:
Personal opinions, and
Statements attributable to the company
Courts examine:
Position of the speaker
Context of the statement
Reasonable perception of third parties
Disclaimers alone may not always protect liability.
8. Best Practices and Risk Mitigation
Clear board-approved communication policies
Identification of authorised spokespersons
Legal and compliance vetting of public statements
Training directors and senior executives
Prompt correction of unauthorised statements
9. Conclusion
Authority to speak is a foundational concept in corporate and securities law. Courts consistently hold that companies are bound by statements made by those who possess actual, implied, or apparent authority. Failure to control and define this authority exposes organisations and individuals to significant legal and regulatory risks.
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