Concept of Procuration
Procuration is a business power of attorney whereby a company authorizes one or more natural persons (hereinafter referred to as: the procurator) to conclude legal transactions and take other legal actions in its name and on its behalf.
Exceptionally, procuration may be issued for the company’s branch only.
Procuration is not transferrable and a procurator may not issue a power of attorney to another person.
By the provisions of Articles 35 to 43 of the Companies Act are regulated appointing the procurator, types of procuration, limitations, revocation and cancellation of procuration, as well as liability and limitations of procurator and procuration issued by a sole trader.
Appointing the Procurator
A procurator is issued by a resolution of general partners, limited partners, i.e. general meeting, unless otherwise provided in the company’s memorandum of association or articles of association.
Procurator is registered in accordance with the registration act.
Types of Procuration
A procuration may be individual or joint procuration.
If procuration was issued to two or more persons without an indication that it is a joint procuration, each procurator acts independently.
If procuration was issued as joint procuration, legal transactions concluded or legal actions taken by the procurators are valid with express consent of all procurators, unless it is indicated in the procuration that consent of a specific number of procurators suffices for validity. Consent may be given in advance or subsequently.
Expression of will or a legal action taken towards one procurator has legal effect as if it was taken towards all procurators.
Limitations of Procuration
A procurator may not do the following without a special authorization:
- Conclude legal transactions and take legal actions with regard to acquisition, disposal of or burdening immovables and shares and stocks the company holds in other legal persons
- Undertake obligations under a bill of exchange or surety
- Conclude loan and credit agreements
- Represent the company in court proceedings or before arbitration.
Restrictions of a procuration that have not been expressly provided in this Act do not have effect against third parties.
Notwithstanding, it is allowed to limit the authorities of a procurator by means of a co-signature with the company’s legal representative or another procurator (joint procuration).
Revocation and Cancellation of Procuration
A company may revoke procuration at any time.
A company may not waive its right to revoke procuration, nor can such right be limited or conditioned in any way.
A procurator may terminate procuration at any time, provided that in the subsequent 30 days, counting from the day of delivery of the notice of termination to the company, he enters into legal transactions and takes other legal actions if necessary to avoid damage being incurred to the company.
Procuration Issued by a Sole Trader
A sole trader personally issues procuration, and may not transfer the authority for issuing procuration to another person.
Liability and Limitations of Representatives,
Proxies by Employment and Procurators
Exceeding the Authorization
A company’s representative, proxy by employment and procurator are liable for damage they incur to the company by exceeding the limits of their authorizations.
Notwithstanding these persons are not liable for damage if they acted in keeping with the resolution of the competent body of the company, i.e. if their actions have subsequently been approved by this body.
Limitations in Concluding Contracts on Behalf of the Company
A company representative, proxy by employment and procurator may not act, without a special authorization, as the other contracting party and conclude contracts with the company in his name and for his own account, in his name but for the account of another person, or on behalf and for the account of another person.
Authorization is given by a resolution of general partners, limited partners, i.e. general meeting, unless otherwise provided in the company’s memorandum of association or articles of association.
This limitation does not apply to the legal representative who is at the same time the company’s sole member.
Signing
When signing documents on behalf of the company, each company’s representative and procurator shall add to the signature his position in the company.
Stating of position is not a formal condition for validity of the document signed.
Read more:
Memorandum of association in Companies act »
Status changes according to the Law on Business companies – concept and types »
Change of the company’s legal form and status changes »