Know your customer “KYC”

KYC procedures should be one of the first steps taken to assess risk and legal requirement and should be undertaken at the commencement of dealings but should also be regularly reviewed. 

In this article we look at “KYC” from a Business to Business (B2B) recoveries point of view. 

To take recovery steps against the wrong one allows for a complete defence to any recovery proceedings you may bring. 

Who are you dealing with?

There are typically five forms of legal personality: 

  1. Sole Trader
  2. Partnership 
  3. Limited Liability Partnership (LLP) 
  4. Private Limited Company (LTD) 
  5. Public Limited Company (PLC)

From the outset of dealings you MUST know exactly who you are dealing with. It is far easier to obtain such information when the relationship commences, the completion of an account opening questionnaire and/or order form should ensure that the correct information is obtained and recorded.

A review of information should also be carried out from time to time with existing customers to ensure that the correct and up to date information is held, following a change of personnel or company status.  

At Athena Debt Recovery, we can assist you in formatting a questionnaire to ensure that all the necessary information is captured to protect you should it prove necessary to take recovery steps.  

Ostensible Authority

Not only is it important to ensure you have the right customer details but it is also that the person with whom you have dealings has the required authority to bind the customer. 

Ostensible authority is the power of an agent to legally bind its principal (the customer) with you.  The authority to bind the principal is “ostensible” because it is perception of you as a third party in respect of the apparent power of the agent which binds the principal.

When an agent holds themselves out as a having authority to other businesses or the world at large and does not inform the third party of a limitation of the actual authority, the principal may be bound as a result of the ostensible authority represented by the agent.

Holding Out with Authority

The holding out is satisfied by appointing a person to a particular position within a company particular office or by producing the indications of authority, such as letterhead, notepaper, business cards, email footer, knowing that the agent is purporting to represent the company. All these involve the company permitting the agent to purport to act on behalf of the principal entity.

Impact of Ostensible Authority

The agent is liable to the principal for exceeding their power, as it is a breach of contract to exceed one’s authority to act for another. The third party is not bound by the principal unless the principal ratifies the contract.

Directors of companies are in a special position in respect of the affairs of the companies to which they are appointed. A presumption arises whereby the director is presumed to have power to bind the company where the third party acts in good faith. 

Continuation of Authority

Ostensible authority may continue after actual authority has terminated and the principal has revoked the actual authority of the agent. This continuation of power to bind the principal may arise where a third party has acted in good faith on prior conduct and does not have notice of the termination of the actual authority of the agent.

Examples of Ostensible Authority

The Sales Director has no authority to sign any document on behalf of the company or has actual power to sign a specified class of documents (such as purchase orders up to a certain value of but not more) and exceeds their authority. Instances of a person having ostensible power takes place include:

  • The agent represents themselves to third parties as a director of the principal a company, such as a Sales Director, when in fact the person is not actually formally appointed as a director of the company.
  • An employee represents that they have authority to bind the company or person when they do not have actual authority.

How Athena Debt Recovery Can Help

Athena Debt Recovery (ADR) is the dedicated debt recovery department of Athena Solicitors LLP. The team at ADR have over 80 years combined experience in the corporate debt recovery field and bring with them a wealth of knowledge and expertise in debt recovery steps to aid your business.

At Athena Debt Recovery we provide a considered approach to speed up debt recovery collections whilst minimising customer conflict and reducing the risk to your business.  

Our service is tailored to match the individual needs of your business and we pride ourselves in offering bespoke, cost effective solutions to your debt recovery needs – from simply chasing late payers to legal proceedings including all county court and insolvency processes.  

We are totally dedicated to helping our clients improve cash flow and increase the profitability of their businesses and we use the latest in Debt Recovery software enabling us to process both prelegal and legal collections promptly and efficiently.

About the author

Iain Bould

Senior litigation executive and manager

Iain is a senior litigation executive and manager of Athena Debt Recovery which is part of the firm’s commercial litigation department supervised by our head of commercial litigation partner Stephen Boyd.

Iain has over 28 years’ experience in Commercial Debt Recovery having worked in both Private Practice and Industry and has extensive experience working across all industry sectors and has a particular expertise in working with Insolvency Practitioners in advising and recovering outstanding insolvent company ledgers.

Iain brings a pragmatic and commercial approach to recovering debts.

Contact us for a free consultation

If you need any advice or further information regarding this article, please contact us.  

As discussed above we offer a free initial consultation and if clients have a viable claim, we offer a variety of retainer options including no win – no fee arrangements.  Every case or potential case will be assessed, on its own merits.

If you have found this article interesting and would like to learn more about how Athena Law can help you please feel free to contact the writer, Iain Bould, at or via the contact page on the website.

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