Contract with yourself: how to sign?

 Suppose the FLP has equipment that it is ready to lease to a legal entity in which the same FLP, more precisely, the same citizen, is the director. Or, suppose a legal entity sells some fixed asset to its director. Is it legal to sign an agreement with two parties by the same person? How to draw up such an agreement? Let’s get it right.

 Is it legal? Let us say right away: the same person cannot sign an agreement from two parties. The fact is that according to part 3 of art. 238 of the Civil Code of Ukraine, a representative cannot carry out transactions on behalf of the person whom he represents, in his own interests or in the interests of another person of which he is simultaneously a representative. Exception: commercial representation or other cases established by law.

Why does this rule apply to the situation with signing a contract?

 The problem here is that the director of the legal entity is a representative of the same legal entity. By signing an agreement on behalf of the latter with himself (i.e., as with an individual or a private entrepreneur), he clearly acts in his own interests.

 However, there is an alternative point of view. Its meaning is that the director and the legal entity do not stay in the relations of the representative office. The director acts on behalf of the legal entity as its executive body.

 This alternative position at one time appeared in the practice of higher courts. However, even the Supreme Court of Ukraine came to the conclusion that in the relations between the director and the legal person to apply part 3 of Art. 238 GKU need.

Since then, we have not been able to find a different position in court decisions. Therefore, we strongly recommend that you do not sign the same person a contract from different sides.
Violation of the provisions of Part 3 of Art. 238 GKU can lead to the invalidity of the transaction (i.e., contract).

 How to solve this problem? The task is obvious: to make sure that one of the parties is not the director.

 If he instructs a third party to conclude an agreement on his behalf, then from part 3 of article 238 GKU we will not go far. Here, nevertheless, the director’s actions in his interests will be traced. If the contract is not signed by the director on behalf of the legal entity, then, in essence, such a transaction will already comply with Art. 238 GKU. Indeed, two different entities express interest in concluding a contract – a legal entity and an individual / individual entrepreneur (he is the director).

 According to Part 2 of Art. 207 of the Civil Code of Ukraine, a transaction carried out by a legal entity is signed by persons authorized to do this by its statutory documents, power of attorney, law or other acts of civil law. The director has the right to sign contracts by force of law.

 Part 5 of the Art. 65 HKU, part 10, article 39 of the Law of Ukraine “On Limited and Additional Liability Companies” dated 02.06.2018, No. 2275-VIII, part 5 of Art. 59 and h. 2 Article 60 of the Law of Ukraine “On Joint-Stock Companies” dated September 17, 2008 No. 514-VI.

 He does not need a power of attorney. If this is not a director, then the legal entity can authorize someone to sign the contract with the help of: power of attorney; statutory documents.

 Power of attorney is the most common way to solve a problem. The bottom line is that the legal entity instructs someone to sign such an agreement on their own behalf. And it doesn’t matter if this is an employee of the enterprise or not. The power of attorney is notarized only if the contract itself is also notarized (part 1 of article 245 of the Civil Code).

 For example, a car rental agreement is concluded between a legal entity and its director. Since according to Part 2 of Art. 799 GKU such an agreement is subject to mandatory notarization, then the power of attorney must be notarized.

 However, you must agree, from the point of view of Part 3 of Art. 238 GKU scheme is not the most reliable. That is, even if there is a power of attorney from one of the parties, there is a risk of recognition of such an agreement invalid. In court practice it is rare, but similar decisions are found.

 The decision of the general meeting. A less common option, but, we believe, more reliable.

 Its essence is that the general meeting by its decision transfers the right to conclude an agreement to someone, instructing to issue a power of attorney for this. In this case, such a power of attorney will also be signed by the director or other authorized body in accordance with the specific charter (Article 246 of the Civil Code).

 However, in this way, in our opinion, it is no longer possible to say that the director acts in his own interests. Indeed, by its decision, the legal entity additionally emphasizes the will of the legal entity to conclude an agreement.

 True, in a situation where a legal entity has a sole participant (owner) also has a director, the problem is part 3 of art. 238 GKU does not disappear. Although the director here is constantly acting in his own interests, without even signing a contract with himself.

 The most radical way is to introduce into the charter an official (anyone other than the director) who could sign the contract on behalf of the legal entity. Further, this entity can be entered into the USR as a signatory (a person who has the right to carry out actions on behalf of a legal entity, including concluding agreements, without a power of attorney).

 So, if a legal entity and an individual / FLP (he is the director of such a legal entity) are going to conclude an agreement, then:
1) it is impossible to sign such an agreement from two parties to the same person;
2) to entrust to a third party (for example, the chief accountant) the signing of an agreement on behalf of a legal entity with an individual (FLP) – the director can be using a power of attorney, but this situation can still fall under part 3 of article 238 GKU;
3) the safest option – the general meeting trusts someone to sign the contract, and instructs the director to issue the appropriate power of attorney;
4) if the sole participant (owner) of the legal entity is also the director, then the risk of invalidating the contract due to violation of Part 3 of Art. 238 CCU even with a power of attorney and the decision of the general meeting remains.

Author: Kristina Vorozhbitova

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