The Cost of Skipping Authority Verification

It is a strange feature of deal-making that the most basic verification — does this person or entity actually have the authority to enter into this transaction — is so often assumed rather than confirmed. Sponsors are trusted because they are confident, well-connected, or simply because earlier conversations went well.

The cost of skipping this step is not theoretical. We have seen negotiations run for months, advisors fees accrue, and term sheets signed, only for it to emerge during final due diligence that the signing party required a board resolution they did not have, or that a co-owner had never consented to the transaction at all. At that point, the cost is not just wasted time — it is reputational, for everyone who introduced or supported the deal.

Verifying authority properly is rarely complicated. It means requesting and reviewing the actual constitutional documents, resolutions, powers of attorney or trust deeds that establish who can bind the entity in question — and doing it early, before significant time or money is committed to the rest of the transaction.

It also means being comfortable asking directly: can you show me the document that confirms you can sign this? A sponsor with nothing to hide will produce it without friction. One who resists, delays, or grows defensive at the request has just given you the most useful piece of information in the entire due diligence process — for free, and early.