I am the treasurer of a local club. All cheques and other
transactions require two signatures, mine and that of the secretary.
The secretary likes to purchase items for the club on ebay, and it was
agreed by the committee that the club open a Paypal account to pay for
them. The worrying aspect is that the secretary was able to set up a
direct debit with our bank in favour of Paypal online with no
signature at all, let alone two.
The bank says they can do nothing to prevent this.
What is the legal position?
Presumably the DD was set up on-line? In order to be able to do that,
the secretary must *already* be able to do on-line transactions without
any involvement from you.
In order to get this level of on-line access, *all* authorised
signatories (therefore including you) must have signed an application
form to authorise this.
I am the treasurer of a choir. Cheques require two signatures (any two
of Chairman, Secretary, Treasurer). *But*, having been authorised by the
others, I can operate the account on-line - and make payments entirely
on my own. Not wonderfully satisfactory, but I'm not sure how you would
implement the equivalent of two signatures when making on-line transactions.
A better way for your club may have been for the secretary to use a
personal credit card for PayPal, and then be reimbursed by cheque for
any purchases retrospectively approved by the committee.
Cancel online banking immediately, it defeats the system of
There is no reason to use online banking where proper accounts are
used - a simple spreadsheet is sufficient.
Every business works fine by people incurring expenses and then
claiming back on production of a genuine receipt.
Credit Card provides protection for any single item >£100, PayPal
provides some protection from 1p - subject to the funds being
recoverable (PayPal should use a bonded system, but never mind).
PayPal also provides a second line of online receipts which are
unalterable, a useful audit trail.
If purchases are with common suppliers they may be willing to set up a
credit account which is settled per invoice or per month etc.
As it stands the two signature system has been completely defeated.
I understand why the buyer may want to use Ebay & PayPal for discounts
or difficult to obtain items, but there is no reason not to use their
own credit card or a prepay card. PayPal accounts can be subject to
third party fraud, the two signature system has been defeated, cancel
the online banking & paypal link.
Most such accounts forbid business use, so, at some level of usage you
will be violating the terms of the account. Transaction charges on
business accounts are much higher!
I don't believe that HMRC particularly like money going through private
accounts, and, if you do so, you must either have a formal dispensation,
or include them on your tax return, even if expenditure and income balance.
An unincorporated club is still considered a business.
That depends entirely on how large the expenses are. There are some
people who could not afford to use their own money to buy a few
thousand pounds' worth of goods, even if they will be reimbursed with
a cheque at the end of the month.
Some banks have online accounts for businesses and clubs where one
person can set up a transaction, but it won't be effected until a
second signatory logs in and authorises it.
This is useful when making online payments by 'push' transfer but
wouldn't help with Paypal which pulls money from the associated bank
Maybe you and the secretary could each have half of the Paypal
password; if you can't be at the same computer when making a payment
then one of you could type your half of the password in using remote
access like TeamViewer.
Which ones? I'm fed up with with Lloyds-TSB who've just told me they
lost our club's signatory information in 2009 "due to a software error".
But they've been clearing our cheques all that time so there hardly
seems any point in requiring signatures anyway.
They have now sent me what seems like enough paperwork to form a
multinational corporation, with the club name mis-spelled on every page.
It would probably be easier to change banks.
BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here.
All logos and trade names are the property of their respective owners.
Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee
neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.