How does &quot;apparent authority&quot; work for a company&#39;s directors?
<p>An employee or agent of a company has <a href="https://en.wikipedia.org/wiki/Apparent_authority" rel="nofollow">apparent authority</a> to transact on behalf of the company if his function or standing with the company will lead a reasonable person to believe that the company person has authority to transact, whether or not s/he actually has that authority.</p>

<p>For instance, if a company made someone VP of Purchasing, one would reasonably believe that this person can purchase on behalf of the company. More to the point, if a Manager of Purchasing had the authority to purchase up to $1 million, and actually made a purchase of $2 million, in most cases the manager would have "apparent" (though not actual) authority to make the $2 million purchase.</p>

<p>If one is a member of the company's Board of Directors, the term "ostensible authority" is used to describe apparent authority. How does this work, and does it differ in any way from "apparent authority." Put another way, what gives (or removes) "ostensible authority" from a board member to deal on behalf of the company.</p>

<p>They are the same thing.</p>

<blockquote>
  <p>We turn then to the subject of <strong>apparent or, as it is sometimes called,
  ostensible authority</strong>, essentially the legal wellspring from which,
  absent actual authority... Greene drew the right to hold Hellman for
  the acts of Driscoll.</p>
</blockquote>

<p><a href="http://www.leagle.com/decision/198024851NY2d197_1231/GREENE%20v.%20HELLMAN" rel="nofollow">GREENE v. HELLMAN 51 N.Y.2d 197 (1980)</a></p>

<blockquote>
  <p>apparent authority is dependent on verbal or other acts by a principal
  which reasonably give an appearance of authority to conduct the
  transaction</p>
</blockquote>

<p>As another answer has stated ostensible and apparent authority are the same thing.</p>

<p>A director has ostensible authority to do anything the company is legally able to do by virtue of being a director - this is essentially what a director <em>is</em>. For a company to invalidate an action taken by the director they would need to demonstrate that the other party knew or should reasonably have known that the director did not have the authority.</p>

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