A Title Is Not Unlimited Authority

By Mark Bold | leadership | 8 min read

A CEO signature, a managing partner title or a founder’s ownership stake does not settle who may approve a transaction. Separate entity power, internal approval, outside enforceability and personal exposure.

A founder may know the business better than anyone else. A CEO may have negotiated its most important customer relationships. Neither fact, by itself, answers whether that person may approve the next transaction.

The distinction becomes consequential when a leader signs a contract reserved for board approval, promises an investor rights the company has not authorized, or appoints an officer without following the required process. The transaction may serve a legitimate business objective. The authority to undertake it is still a separate question.

Governing documents are not merely evidence that a company was formed. They allocate power, establish rights and prescribe how certain decisions must be made. An organization that consults them only when a dispute arises has left an important part of its decision process unused.

The practical discipline is not to send every ordinary purchase to counsel. It is to distinguish decisions that management can make within an established delegation from decisions that change obligations, ownership or control.

Separate power, approval and enforceability

Three questions need separate answers: Can the entity undertake this transaction? Who may authorize it internally? What can the outside party enforce?

The legal term ultra vires concerns an entity acting beyond its legal powers. It should not become a catchall for every officer who exceeds an internal approval limit. Delaware's corporate statute generally prevents an act from being invalidated merely because the corporation lacked capacity or power, while preserving specified proceedings. Virginia's stock corporation statute takes a similarly qualified approach. Those rules do not give officers permission to disregard required approvals. [[1]](https://delcode.delaware.gov/title8/c001/sc02/) [[2]](https://law.lis.virginia.gov/vacode/title13.1/chapter9/section13.1-629/)

Internal authorization asks a different question. Delaware generally places corporate business and affairs under board management or direction, subject to statutory and charter exceptions. Officer selection and powers depend on the bylaws and applicable board action. The answer therefore requires the actual governance record, not an assumption that every CEO contract needs a board vote or that none does. [[3]](https://delcode.delaware.gov/title8/c001/sc04/index.html)

External enforceability is different again. Virginia's LLC statute, for example, generally makes an apparently ordinary business act by a member or manager in the relevant management structure binding unless that person lacked authority and the counterparty knew or had notice of the lack. It treats nonordinary acts differently. An internal approval failure therefore does not necessarily let the company walk away from its commitment. [[4]](https://law.lis.virginia.gov/vacode/title13.1/chapter12/section13.1-1021.1/)

Read the documents that govern this entity

For a corporation, the relevant record can include the charter or articles, amendments, bylaws, shareholder arrangements, board resolutions and delegations. For an LLC, the operating agreement, formation documents, amendments and management provisions require their own analysis.

These are not interchangeable systems. Delaware's LLC statute provides default management and binding authority rules unless the agreement provides otherwise. Its agreements can also materially alter duties and liability, subject to statutory limits. Assuming that every LLC operates like a corporation can be as misleading as ignoring its agreement altogether. [[5]](https://delcode.delaware.gov/title6/c018/sc04/index.html) [[6]](https://delcode.delaware.gov/title6/c018/sc11/index.html)

Consider a material agreement that requires approval beyond the signing executive's delegation. Negotiating an attractive price does not supply that approval. Nor does a colleague's informal enthusiasm necessarily constitute the vote or consent the governing arrangement requires.

A useful review identifies the source of authority, the reserved matter, the required decision makers and the evidence of approval. If the documents no longer fit the business, the answer is to consider a properly authorized change, not silently substitute management's preferred practice.

Equity is not just an entry in a spreadsheet

Equity commitments deserve particular care because they can affect economics, voting and the allocation of control.

For a Delaware corporation, stock classes and their rights must follow the certificate and statutory framework. The certificate may expressly authorize the board to establish particular terms. Issuance authority can also be delegated through a qualifying board resolution. The existence and limits of that authority matter; a spreadsheet or an offer letter does not establish them. [[7]](https://delcode.delaware.gov/title8/c001/sc05/index.html)

An LLC requires a different inquiry. Delaware permits agreements to establish classes, provide for future classes and, in some circumstances, authorize action without a member vote. The rule is not that every equity issuance needs unanimous approval. The question is whether this agreement and the applicable law permit this issuance, these rights and this recipient's admission. [[8]](https://delcode.delaware.gov/title6/c018/sc03/)

The same care applies to titles. A business card naming a managing partner or officer should not substitute for checking the actual appointment and delegation. Confirm that the officer or manager was appointed under the applicable bylaws or LLC agreement and that the stated role matches its authority. External consequences remain entity and fact specific; Virginia's LLC statute, for example, varies its binding rule by management structure, the nature of the act and counterparty knowledge or notice. [[3]](https://delcode.delaware.gov/title8/c001/sc04/index.html) [[5]](https://delcode.delaware.gov/title6/c018/sc04/index.html) [[4]](https://law.lis.virginia.gov/vacode/title13.1/chapter12/section13.1-1021.1/)

Accountability is not automatic personal liability

An approval defect can create company exposure and internal accountability without making the executive personally responsible for every company obligation.

Delaware and Virginia LLC statutes protect against personal liability based solely on specified ownership or management status. Delaware expressly allows a member or manager to assume personal obligations by agreement. A personal guarantee is therefore different from a company contract signed in a representative capacity. [[8]](https://delcode.delaware.gov/title6/c018/sc03/) [[9]](https://law.lis.virginia.gov/vacode/title13.1/chapter12/section13.1-1019/)

Personal exposure can also rest on a separate actionable wrong. In the unpublished 2024 Virginia appellate opinion Tran v. Industrial Development Authority, the court upheld conversion liability against an LLC's sole member and manager based on his own conduct, not his ownership status. It explained that veil piercing was unnecessary for that claim. This fact specific result does not turn a missed approval into a tort or establish that every internal defect creates personal liability. [[10]](https://www.vacourts.gov/opinions/opncavwp/0277234.pdf)

Likewise, disregarding an approval requirement does not automatically pierce the liability shield. Corporate and LLC requirements differ, and veil piercing is a separate analysis. The concern is real, but describing every governance lapse as personal liability overstates the law and obscures the actual problem.

Respect the rights the company has granted

A founder's contribution can be substantial without making other owners' rights optional. Rights to vote, receive information or participate in specified decisions depend on the governing arrangements and applicable law, not on whether management currently considers an owner useful.

Delaware's LLC statute, for example, addresses member voting arrangements and qualified rights to company information. Those rights have conditions and can be shaped by the agreement; they should neither be assumed unlimited nor dismissed because a member is no longer involved in daily operations. [[8]](https://delcode.delaware.gov/title6/c018/sc03/)

The practical risk increases when leadership treats disagreement as evidence that an owner should be excluded. A commercial disagreement does not itself rewrite the agreement. Before refusing a request or proceeding without another person's participation, identify the right being asserted and the legal basis for the proposed response.

Build a short pause into consequential decisions

A proportionate authority check can be brief: identify the proposed commitment, locate the governing approval rule, confirm the required approval and record it before execution.

Counsel adds value by connecting that legal analysis to the objective. The business may need a faster delegation, a different transaction structure or an amendment that preserves agreed protections while removing unnecessary friction. Producing a document is part of that work, not its entire purpose.

If a defect has already occurred, seek advice before assuming it is incurable or harmless. Delaware provides statutory procedures for certain defective corporate acts and LLC transactions. Those procedures have conditions; they are not a general eraser for every independent wrong. [[11]](https://delcode.delaware.gov/title8/c001/sc06/index.html) [[12]](https://delcode.delaware.gov/title6/c018/sc01/index.html)

Executive Imperatives

1. Check the source of authority. Connect the proposed act to the statute, governing documents and valid delegation, rather than relying solely on a title.

2. Distinguish the legal questions. Internal approval, outside enforceability and individual accountability require separate analysis.

3. Review ownership changes before promising them. Confirm the authorized class, rights, approvals, admission or issuance process and supporting records.

4. Use counsel before options narrow. Explain the business objective and request an authorized route to it, including lawful correction when necessary.

Scope

This article uses Delaware and Virginia law as illustrations, researched October 8, 2026. It is general information, not an opinion about a particular company or transaction. Governing law, documents and facts can change the analysis.

Sources

1. [Delaware General Corporation Law §§121-127, including §124](https://delcode.delaware.gov/title8/c001/sc02/)

2. [Virginia Code §13.1-629: lack of power to act](https://law.lis.virginia.gov/vacode/title13.1/chapter9/section13.1-629/)

3. [Delaware General Corporation Law §§141-142: directors and officers](https://delcode.delaware.gov/title8/c001/sc04/index.html)

4. [Virginia Code §13.1-1021.1: agency of members and managers](https://law.lis.virginia.gov/vacode/title13.1/chapter12/section13.1-1021.1/)

5. [Delaware LLC Act §18-402: management and authority](https://delcode.delaware.gov/title6/c018/sc04/index.html)

6. [Delaware LLC Act §18-1101: agreements, duties and liability limits](https://delcode.delaware.gov/title6/c018/sc11/index.html)

7. [Delaware General Corporation Law §§151-152: stock classes and issuance](https://delcode.delaware.gov/title8/c001/sc05/index.html)

8. [Delaware LLC Act §§18-301-305: admission, classes, liability and records](https://delcode.delaware.gov/title6/c018/sc03/)

9. [Virginia Code §13.1-1019: LLC liability to third parties](https://law.lis.virginia.gov/vacode/title13.1/chapter12/section13.1-1019/)

10. [Tran v. Industrial Development Authority, Virginia Court of Appeals (unpublished, 2024)](https://www.vacourts.gov/opinions/opncavwp/0277234.pdf)

11. [Delaware General Corporation Law §§204-205: defective corporate acts](https://delcode.delaware.gov/title8/c001/sc06/index.html)

12. [Delaware LLC Act §18-106: powers and ratification](https://delcode.delaware.gov/title6/c018/sc01/index.html)