Who Signs the Franchise Agreement? Checking Their Authority

Your prospective partner has agreed the terms, chosen premises and is ready to pay the fee. But the person conducting the negotiations is not always authorised to sign the agreement on behalf of the prospective franchisee. Before scaling an existing business, establish a dedicated procedure for checking authority to sign. For franchise networks, this is a foundation for reliable relationships: both parties need to understand who is taking on obligations and on what basis.

1. Distinguish the negotiator from the contracting party

A prospective franchisee may be represented at meetings by an investor, company founder, manager or consultant. Taking part in negotiations does not, in itself, confer authority to enter into a transaction. Even the sole member of a Russian limited liability company (OOO) does not automatically become its authorised representative: they need the appropriate authority to sign the agreement.

First, establish exactly who will acquire the franchise. Record the company’s full legal name or the individual entrepreneur’s full name, their taxpayer identification number (INN) and registration number. These details must match across the draft agreement, its schedules and the documents confirming authority.

In Russia, commercial concession arrangements—the legal framework used for franchising—are specifically governed by Chapter 54 of the Russian Civil Code. Under Article 1027(3), the parties may be commercial organisations or registered individual entrepreneurs. If a candidate is still acting as a private individual, do not sign the main commercial concession agreement with them on the assumption that they will register a business later.

The Civil Code’s general rules on representation and powers of attorney also apply, alongside the relevant corporate legislation for companies. Checking authority therefore involves more than confirming business registration.

Before preparing the final version, ask this practical question: ‘Which company or registered individual entrepreneur will be the contracting party, and who will sign on their behalf?’ Obtain the answer in writing rather than trying to reconstruct it later from correspondence.

2. Check the company’s head and its representation arrangements

If the company’s head is signing the agreement, obtain an up-to-date extract from the Unified State Register of Legal Entities (EGRUL) through the Federal Tax Service’s online service. Check the company’s status, the details of anyone entitled to act without a power of attorney, and any entries flagging information as unreliable. Keep the extract together with the date it was obtained.

Do not rely solely on the job title in the signature block. A ‘Business Development Director’ may be an employee with no authority to enter into agreements, while ‘General Director’ on a business card does not substantiate an entry in the register.

Request the documents needed for your checks:

• the current version of the company’s charter, or confirmation that it uses a model charter;
• the resolution or minutes appointing the company’s head;
• explanations and supporting documents for any discrepancies with the EGRUL entry;
• details of the representation arrangements if several people act on the company’s behalf.

The final point is particularly important. Company heads may act independently of one another or jointly. Where joint representation applies, one signature may not be enough. Check not only the names but also the prescribed arrangements for acting on the company’s behalf.

If the company’s head has recently changed, do not try to resolve uncertainty with a promise to ‘provide the documents after payment’. First establish the appointment date, when the previous officeholder’s authority ended and the current position in the register. Refer any unresolved issue to a lawyer before signing.

3. Examine the power of attorney and corporate approvals

Where a representative signs, check their power of attorney. It must contain the date of issue, details of the principal and representative, and authority covering the transaction being entered into. Under Article 186 of the Russian Civil Code, a power of attorney without a date of execution is void. The absence of a stated validity period does not, in itself, invalidate it: as a general rule, it remains valid for one year from the date of execution.

Compare the wording of the power of attorney with what the representative will actually do. Authority to negotiate or receive documents is not equivalent to authority to enter into a commercial concession agreement. Separately check their authority to sign schedules, amend terms and take steps to register the grant of rights, if these tasks form part of their role.

Establish who issued the power of attorney, whether the company head who issued it acted within their authority, whether it has expired and whether there is any indication that it has been revoked. Not every company power of attorney requires notarisation: the required form depends on the law and the nature of the authorised acts. Where authority has been delegated under a further power of attorney, the entire chain of authority needs additional checking.

Next, assess whether corporate approval is required. For Russian limited liability companies, the relevant rules are set out in Federal Law No. 14-FZ ‘On Limited Liability Companies’, particularly Articles 45 and 46 on interested-party transactions and major transactions. Joint-stock companies are subject to Federal Law No. 208-FZ.

Not every franchise agreement requires approval. Relevant factors include the transaction’s terms and scale, whether it falls within the ordinary course of business, any interested-party relationships and the provisions of the company’s charter. Do not decide whether approval is needed solely by reference to the initial franchise fee. If approval is required, obtain a resolution from the competent corporate body and check that it matches the agreed terms.

4. Build the checks into the signing process

Create a short transaction checklist recording the contracting party, signatory, basis of authority, documents checked, discrepancies identified and the responsible employee’s decision. When building a partner network, this procedure is more useful than a folder of scanned documents with no recorded conclusions.

Check the information again if a significant period has passed between agreeing the draft and signing, or if you learn of a change in the company’s leadership. Where an electronic signature is used, verify who it belongs to and whether it is valid, as well as the signatory’s authority, including a power of attorney where required. The technical ability to sign a file is no substitute for legal checks.

Article 1028 of the Russian Civil Code requires a commercial concession agreement to be in writing. The grant of the right to use the package of exclusive rights must be registered with Rospatent, Russia’s intellectual property office; without registration, the grant is deemed not to have taken effect. Checking the signatory and registering the grant serve different purposes: neither replaces the other.

Practical takeaway: before signing, confirm three things: who is taking on the obligations, who is authorised to act on their behalf and whether any additional approvals are needed. If discrepancies remain unresolved, put the transaction on hold rather than postponing the checks until after the outlet has opened.