An account mandate is a document that sets out:
- who owns an account (often called the account holder or account owner)
- who can use the account (and how it can be used, referred to as authorised signatories)
- who can access information about the account.
A mandate is very straightforward if you are the only one operating an account. But you need to take care if there are two or more account holders, or if you let someone else operate the account.
Authorised signatories
Account holders can let someone else operate the account. These people are often called authorised signatories. Most banks require account holders to also be authorised signatories. Banks often require organisations such as companies, trusts and partnerships to have a certain number of directors, trustees, partners or officers who are authorised signatories. They also require rules about how such people access accounts.
Individual authorised signatories can use an account separately if the mandate says “several”, “any” or “either” authorised signatory can sign (that is, operate the account).
A mandate that requires “joint”, “both” or “all” (or in some cases “any two”) authorised signatories to sign or access the account together means one authorised signatory alone cannot use the account. Other authorised signatories must also authorise the transactions. A bank cannot allow transactions or other activity without the consent of the other holders.
Types of access
Be clear about what type of access you want authorised signatories to have. Do you want them to be able to access the account alone, or do you want them to act together? Consider this carefully before you set up an account – and before you sign the mandate check it carefully to ensure it accurately records how you want the account to be operated.
If you change your mind later on, and want to switch from one type to another (or want to add a new account holder) you may need the agreement of all account holders. If you have concerns about the operation of a joint account, contact the bank. It may freeze the account until you have resolved your differences. (See our Quick Guide Joint accounts.)
A bank must act in accordance with the arrangement you have specified. In general, transactions not in accordance with the mandate are unauthorised, and a bank is responsible for any resulting loss. If it can be established that a transaction in breach of mandate benefited the account holder, then generally there is no loss (except in very limited circumstances such as children's accounts). Sometimes, a bank will not be responsible for all of a loss if a customer has contributed in some way to the breach or failed to mitigate the loss.
When setting up your account make sure the mandate accurately records how you want the account to be operated.
Mother suffered no financial loss as a result of bank paying invoice without other signatory’s approval
Juniper and her brother were signatories on their elderly mother's account. The account mandate said they had to act jointly to authorise any transactions. However, in May 2023, Juniper noticed a payment of $10,000 to her mother’s lawyer that Juniper had not authorised. She contacted the bank and learned her brother had authorised the payment at a branch. She complained the bank had breached the mandate and asked for the payment to be reversed. The bank acknowledged its error but declined to reverse the payment, saying the payment was for legal fees invoiced to her mother and that it did not believe her mother had been financially disadvantaged by the transaction. It agreed that the error had caused Juniper stress and inconvenience and offered her $750. However, Juniper did not accept the bank's offer. She said the bank needed to reverse the transaction to put right its wrongdoing. She was unhappy about aspects of the legal fees and said the payment had taken away her right to dispute them.
CASE 2Bank failed to set up account in a way that prevented brother using funds for gambling
Natalia’s brother had a gambling problem. In 2017, the pair asked the bank to set up an account that he could access only with the agreement of Natalia or her sister. The bank opened a term deposit and made the brother the account owner and the two sisters the signatories, with a ‘two-to-sign’ rule. The brother deposited $120,000 in the account. In 2018, the brother transferred the funds to his own bank account and spent $25,000.
CASE 3Bank entitled to take company document at face value
Jack was removed as managing director of two companies and his account operating authority for the companies’ bank accounts was withdrawn. However, the bank relied on a resolution in the minutes of a board meeting – rather than a properly executed shareholders' meeting – to withdraw Jack’s ability to use the companies’ bank accounts.
Deceased customers' accounts
A bank will freeze a deceased customer’s individual accounts when notified of the death. This includes transactional accounts, term deposits, credit cards and loans.
Banks won’t necessarily know that a customer has died, so it is important to notify the bank as soon as possible. Anyone can notify the bank but typically this responsibility would fall on the next of kin or the estate representative…
Children's accounts
Children don’t have unrestricted use of bank accounts. Nor are they free to open bank accounts on their own. To do that, they need an adult’s involvement. The role of adults (usually the parents) is to decide what type of account would be best for the child. They also decide who can have access to the account.
The rules governing who can operate an account are set out in a document called an acco…
Closing accounts
A bank can end its relationship with a customer at any time, just as a customer can move to another bank at any time. A customer may move because a competitor offers a better deal or because the relationship with the bank is unsatisfactory or has broken down. A bank may decide to close a customer’s account because of how that person has been operating it, or because of regulatory requirements, or …
Updated December 2024