The Authority Gap: Aligning Bank Mandates With Board Changes at UK SMEs

When a director leaves a UK SME — by resignation, retirement or death — the company's statutory records and its banking arrangements rarely move at the same speed. Companies House may be updated within days. The bank mandate can lag for weeks. In that interval, payroll can stall, supplier payments can be held, and authority can remain with someone whose connection to the business has ended. The exposure is not theoretical. It sits at the intersection of finance, governance and operational continuity, and it deserves a disciplined response rather than a series of ad hoc calls to the relationship manager.

Why the gap opens

A bank mandate is a private contract between the company and its bank. It is not automatically refreshed when Companies House records change. The bank needs its own instruction, usually on its own forms, with its own evidence requirements. SMEs often discover this at the worst possible moment: a payment run is due, a lender needs a signed confirmation, or a new finance director cannot release funds because the old signatory is still the only person authorised on the account.

The gap is wider in smaller companies where one or two people have historically held broad authority. It is also wider where online banking tokens, direct debit mandates and facility agreements have accumulated over years without a single owner. The result is a fragmented authority map that no one can describe with confidence.

The first 72 hours: contain, do not improvise

Once a board change is confirmed, treat the banking position as a live risk. Identify every account, facility and payment channel connected to the departing director. Ask the bank to suspend or remove that person's access to online banking and any physical tokens or card credentials. Confirm whether dual authorisation can be restored immediately or whether interim limits are needed for essential payments.

Do not rely on informal assurances. Record who instructed the bank, when, and what was confirmed. If the departure is unexpected, involve the remaining directors and the company secretary early. The objective in the first three days is containment: no unauthorised payments out, no essential payments blocked without a workaround.

A mandate reset checklist

The reset is broader than changing a name on a signature card. Work through the following areas as one exercise, with a named owner and a single evidence file.

• Signatories and authority limits. Confirm who may sign, for what amounts, and whether the mandate still reflects the board's intended delegation. Remove departing signatories explicitly rather than assuming they fall away.
• Dual authorisation. Check whether two approvals are required for payments above a threshold. If the departure leaves only one authorised person, agree an interim arrangement with the bank and document the period it covers.
• Online banking tokens and devices. Recover, disable or reissue physical tokens, card readers and mobile credentials. Confirm that administrator rights are held by the right people, not merely the right job titles.
• Direct debits and standing orders. Review the list for mandates that are no longer needed, duplicate payments or services that should be reauthorised under the new signatory set.
• Lender covenants and facility documents. Inform lenders where the mandate change affects representations, notice provisions or authorised signatories. A facility agreement may require notice of a director change even where the bank account itself is unaffected.
• Internal records. Update the delegated authority schedule, bank mandate file, board minutes and any internal payment approval matrix. The bank's records and the company's records should tell the same story.

A 30-day timetable

A practical sequence helps prevent drift. In the first week, contain access and assemble the evidence: board resolution, resignation or appointment documentation, identification for new signatories and the bank's own forms. In the second week, submit the mandate change and agree interim payment arrangements in writing. In the third week, reconcile direct debits, standing orders, tokens and lender notifications. In the fourth week, test the new arrangements with a low-value payment, confirm dual authorisation works as intended, and file the evidence with the board pack.

The timetable should be adjusted for complexity, but it should not be left open-ended. A mandate reset without a deadline tends to become a background task that resurfaces during an audit or a payment failure.

Keep the board and the bank in step

Good governance does not stop at the bank form. The board should receive a short confirmation that the mandate has been updated, that online access has been reissued, and that lender notifications are complete. Where the change affects financial control, the finance lead should update the approval matrix and brief anyone who authorises payments.

It is also sensible to diarise a periodic mandate review — annually, or whenever a director joins or leaves. The review need not be elaborate. A one-page authority map, a current signatory list and a record of the last bank confirmation will do more for resilience than a shelf of policies.

The authority gap is easy to ignore while everything is working. It becomes expensive when a payment is blocked, a lender asks a question, or an unauthorised person still holds access. Closing it is a matter of routine discipline: act early, document clearly, and make the bank's records match the board's decisions.