For large companies that have to deal with hundreds of legal transactions every day, authorized signatories are indispensable. The power of attorney is also often used to bind particularly qualified employees to the company; sometimes this instrument is also used to circumvent a management ban. But what exactly is power of attorney, what is it entitled to, which obligations are attached to it and who can issue them? Our article provides the answers to these questions.
What is power of attorney according to HGB?
The power of attorney is a special power of attorney that gives its owners, i.e. the authorized signatories, very extensive competencies that, depending on the design, can approach the scope of action of a manager or a board member. Sections 48 ff of the Commercial Code (HGB) form the legal basis , and the provisions on power of attorney in accordance with Sections 116 ff of the German Civil Code (BGB) are also used.
In which companies are authorized signatories allowed?
Not every entrepreneur can be represented by an authorized signatory. This instrument is restricted to certain legal forms , in particular merchants within the meaning of the Commercial Code. These include
- Corporations (AG, KGaA, GmbH, UG)
- Partnerships (e.g. OHG, KG, GmbH & Co. KG)
- registered merchants (registered merchants)
Furthermore, the Genossenschaftsgesetz provides for the possibility of appointing authorized signatories (Section 42 GenG).
The following entrepreneurs, on the other hand, cannot grant power of attorney.
- freelancer
- tradespeople not entered in the commercial register
- Civil Law Societies (GbR)
- Partner companies
- (registered) associations
What is the authorized signatory allowed to do?
According to Section 49 (1) of the German Commercial Code (HGB), the power of attorney authorizes all types of judicial and extrajudicial transactions and legal acts that are involved in the operation of a commercial trade. The authorized signatory may, for example
- finish contracts
- Buy and pay for goods and services
- Hire and fire employees
- Take out loans
- represent the company in court and conduct litigation
The power of representation of an authorized signatory only includes normal legal transactions. According to Section 49 (2) of the German Commercial Code (HGB), he is therefore only authorized to sell and encumber land if this authorization has been expressly granted to him. The same applies to so-called basic business such as the sale of the company or essential parts of the company as well as the cessation of business operations and the deletion of the company.
The authorized signatory cannot take any actions that are reserved for the principal or his legal representative, i.e. in the case of a corporation, the managing director or board of directors. He is therefore not allowed to sign the annual financial statements under commercial law (only the company’s tax return).
Like a managing director, he can be exempted from the ban on self-contracting (181 BGB).
Tip!
If you are obliged to keep double-entry bookkeeping, you have to evaluate and close the financial year in the form of annual financial statements at the end of each year . Special regulations apply here which you should absolutely observe.
What types of procuration are there?
The Commercial Code knows various forms of procuration that regulate the scope of action of the procurator.
Single power of attorney
The single power of attorney is the most far-reaching form. Sole authorized signatories represent the principal alone.
General power of attorney
According to Section 48 (2) HGB, the power of attorney can also be jointly assigned to several people. In this case, the authorized signatory may not represent the company alone, but only together with one or more other authorized signatories.
Real full power of attorney
A real full power of attorney exists if all of the appointed authorized signatories are not authorized to represent on their own.
Full power of attorney on one side
The half-page full power of attorney describes the case in which one or more authorized signatories has only been granted full power of attorney, while other authorized signatories are authorized to represent individually.
Unreal (mixed) joint power of attorney
In the case of false power of attorney, the authorized signatory may only represent the company together with a member of the executive body, i.e. a managing director or a member of the board of directors.
Branch power of attorney
The branch power of attorney is regulated in Section 49 (3) HGB and limits the power of representation of the authorized signatory to a branch (branch) of the business owner. It is only effective vis-à-vis third parties if the individual branches are operated under different companies, e.g. XY-GmbH Cologne and XY-GmbH Düsseldorf.
Restriction of the power of attorney
With the exception of the branch power of attorney, a content-related restriction of the power of attorney is not effective against third parties (Section 50 (1) HGB).
The limitation of the power of representation, as is the case with the various forms of joint power of attorney, must, however, apply to third parties, provided this is entered in the commercial register. If there is no corresponding restriction from the entry in the commercial register, third parties may assume an individual power of attorney.
In the case of important transactions, it can therefore be worthwhile to check the type of power of representation of an authorized signatory and to view an extract from the commercial register. This is now also very easy and possible for little money online via the company register .
An appeal to the power of representation by third parties is excluded if they cooperate collusively with an authorized signatory to the detriment of the principal. This is the case, for example, when an authorized officer accepts excessive cost prices because the supplier’s sales manager pays him a bribe.
