—Bank Account
Changing Authorised Signatories on a Business Bank Account: Resolution, KYC and Portal Updates
When directors or partners change, the bank account has to change too. How to add or remove signatories, what the bank needs, and the portals to update.
The people who can operate a business bank account are its authorised signatories. When a director resigns, a new partner joins or the business simply wants different people to approve payments, the bank account has to be updated, and so do the other places where those signatories act for the business. Leaving a departed signatory on the account is one of the most common, and riskiest, gaps. This guide explains the process.
Who Decides the Signatories
The entity decides who can operate its account, and how:
- For a company, the board decides, through a board resolution.
- For an LLP or partnership, the partners decide, as the LLP or partnership agreement allows.
- For a trust or society, the trustees or governing body decide, under its deed or rules.
The resolution names the signatories and sets the mode of operation: whether any one can sign alone, whether two must sign jointly, and any limits by amount.
Adding a Signatory
- Pass a resolution appointing the new signatory and stating the mode of operation.
- Collect the new signatory's KYC documents, such as PAN, Aadhaar or other identity and address proof, and a photograph.
- Fill in the bank's mandate or signatory change form, with specimen signatures.
- Submit the certified copy of the resolution, the form and KYC documents to the bank, or through its online process where available.
- Set up the new signatory's net banking access and approval roles.
Removing a Signatory
Removing a signatory is just as important. When a director resigns or a partner retires:
- Pass a resolution removing them as a signatory, and update the mode of operation if it depended on them.
- Inform the bank in writing, with the resolution, and ask it to remove their mandate and net banking access.
- Cancel any unused cheque leaves they signed, and review standing instructions they set up.
- Confirm in writing from the bank that the change has been made.
Until the bank records the change, the departing person may still be able to operate the account.
Choosing the Mode of Operation
- Single operation is convenient for small businesses, but puts a lot of control in one person.
- Joint operation, or limits above which two signatories must approve, adds control as the business grows.
- In net banking, separating the roles of maker and approver gives similar protection for online payments.
Update the Portals Too
The same person often acts for the business on government portals, so update those as well:
- MCA: file the change in directors with the ROC, and associate the new director's DSC.
- GST: update the authorised signatory, and register the new person's DSC where needed.
- Income tax: update the principal contact or authorised person, and register the DSC.
- EPF and ESIC: update the employer's authorised signatory and register the DSC.
- Key customers, suppliers and platforms that rely on the signatory's details.
Common Mistakes
- Leaving a former director or partner on the bank mandate.
- Resolutions that don't clearly state the mode of operation or limits.
- Updating the ROC records but not the bank, or the other way round.
- Not registering the new signatory's DSC on each portal before a filing deadline.
Getting Help
Think Filing drafts signatory resolutions, handles the bank's change process, and updates the MCA, GST, income tax and EPF portals so the business can keep operating smoothly.
Sources
- Companies Act, 2013, on board powers.
- RBI Master Direction on Know Your Customer.