Authorized business check signers pay bills for companies and remit payment for daily business needs, including office supplies and business-related events. The U.S. Uniform Commercial Code contains the laws governing authorized business check signers and details the powers of check signers. Companies must carefully supervise outgoing checks to ensure authorized signers are using company funds appropriately and only for business-related debts.
Check Signer Liability
Article 3 of the Uniform Commercial Code states that an authorized check signer of a business is not directly liable for the funds available to the business when writing a check for the company to pay a creditor or answer a specific debt. A creditor who has a corporation's check returned due to insufficient funds or a nonexistent account must deal with the company directly and cannot sue or commence collection practices against the authorized check signer. According to Covering Business Credit's website, the law does not obligate an authorized check signer to identify her operating capacity with her company on any company check.
Intent to Defraud
A check signer may be liable for his company's bad check if he writes the check knowing that the company does not have sufficient funds to cover the amount written. A creditor receiving this fraudulent payment can pursue the company as well as the check signer in civil court to attempt to recover the debt owed plus damages associated with the bounced check. Knowingly writing a bad check is also a crime of varying severity punishable by a fine and a possible jail term.
Identifying the Payee
The signer of the check has the ultimate say in who receives the corporation's money in that it is the signer's identification of the payee that takes precedence over the company's intent. The authorized signer may legally make a company check payable to a person with a differing name than the name identified on a company bill or invoice. It is the intent of the signer that takes precedence, as the law states that the signer is able to better identify who the company's money should go to for payment of a debt because the signer is actively involved in the paying of that debt.
The power of an authorized check signer demands great responsibility and ethical standards for handling a corporation's finances. Embezzlement occurs when an employee uses company funds for her own personal gain. Embezzlement is a federal and state crime and carries significant penalties, including fines up to the amount stolen and a prison sentence of up to 10 years. The penalties for embezzlement of bank funds range from fines of up to $1 million to 30 years in federal prison. To prevent embezzlement, most companies require two signatures on all company checks.