MBE Rules · Business Associations
Officers' Authority
Cal. Corp. Code § 312
The rule
Corporate officers have actual authority as granted by the bylaws or board resolution, and apparent authority as reasonably inferred from their position. The president typically has apparent authority for acts in the ordinary course of business; extraordinary acts require express authorization.
In plain English
Corporate officers have the power to act on behalf of the corporation based on two types of authority: actual authority, which comes from the company's bylaws or board decisions, and apparent authority, which is inferred from their role. For example, a president usually has the authority to make regular business decisions, but for unusual or significant actions, they need specific permission from the board.
Worked example
A corporation's president signs a contract for a new office lease without prior board approval. The lease is for a standard office space and within the usual scope of business operations. The court finds that the president had apparent authority to enter into the lease, and the contract is enforceable against the corporation.
Memory hook
Presidents can act, but for big moves, they need the board's thumbs up!
The trap
Exams may present scenarios where an officer acts outside their authority but appears to have it, leading students to misinterpret the limits of apparent authority.
How examiners test it
Questions often involve fact patterns where an officer's actions are scrutinized to determine if they had actual or apparent authority, especially in the context of ordinary versus extraordinary business transactions.
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