ICAEW ACA Certificate Level – Law Practice Test

Implied authority refers to the powers that directors are assumed to have due to their position within the company and the responsibilities that come with that role. This authority is not explicitly stated in the company's articles of association or other governing documents, but it arises from the nature of the position itself. For instance, a company director typically has the authority to enter into agreements on behalf of the company or to make decisions that are necessary for the everyday operation of the business.

This is distinct from express authority, which is clearly defined and documented, either in writing or verbal instructions. Ostensible authority, also known as apparent authority, arises when a third party is led to believe that a director has the authority to act on behalf of the company, even if they do not. Limited authority pertains to restrictions placed on a director's powers, which would define specific limits on what actions can be taken. Because implied authority is defined by the recognized capacity of directors and the expectations tied to that role, it accurately captures the essence of the question.