In business and public administration, we often encounter the term statutory representative. Who can it be, what powers does it have and how does it differ from a statutory body? In this article we will give you an overview of the role of the statutory representative and his/her legal status.
Before we take a closer look at the statutory representative, we should clarify what a statutory body is. This refers to the body of a legal person that has the authority to act on behalf of that legal person. We can therefore say that the statutory body concludes and signs contracts, performs legal acts or perhaps represents the company externally.
In the case of a limited liability company (s. r. o.), the statutory body may be the managing director. In joint stock companies (a. s.), the board of directors or the statutory director acts as the statutory body. In a cooperative, it is the chairman of the cooperative or the board of directors, and in associations, the chairman of the association acts as the statutory body.
The statutory body is responsible for the management of the organisation and is required by law to act with due care.
Whether you are on the verge of electing a statutory representative or you are at the stage where you need to recall one, please do not hesitate to contact us with any queries regarding this agenda. We can prepare contracts or advise you on the legal obligations you need to fulfil in the case of the statutory body and the statutory representative.
The statutory body must represent the legal entity in all matters and organise the day-to-day running of the corporation, so it manages the business and plans the business plans. The statutory body has a duty to convene a general meeting periodically. It also submits the financial statements to it and follows its instructions. In organisations that are required by law to do so, the statutory body is responsible for keeping the accounts. It shall also create and file the legal acts in the collection of documents. In the event of the company’s insolvency, the statutory body is obliged to file an insolvency petition.
The statutory body is usually prohibited from competing, so the managing director cannot serve in two companies in the same capacity and cannot also be a partner in a public company or limited partnership. However, both situations only relate to a similar line of business; in a completely different industry, two positions are possible at the same time..
A statutory representative is an unofficial (not defined by law) term for a natural person who represents a statutory body in situations where the managing director, board of directors or chairman is unable to perform his or her duties. However, there is one difference – a statutory representative does not automatically have the authority to act on behalf of the organisation in every case. The powers of the statutory representative depend on the specific mandate.
So who is such a statutory representative? For example, in municipal governments, the deputy mayor acts as the statutory representative. In schools, in the absence of the head teacher, the deputy head teacher is the statutory representative. In a public limited company, the statutory representative is the deputy chairman of the board of directors, who can act in the absence of the chairman. In a limited liability company, the statutory representative is then a temporarily authorised deputy of the managing director.
Tip: The typical statutory body is the managing director. Read more about how the top ones are elected and what powers they have.
The scope and powers of the statutory representative depend on statutory regulations, internal guidelines and specific contractual arrangements. For example, in public administration, it is often specified who can represent the statutory body and how. In companies, on the other hand, the statutory body can determine to what extent and to what extent the representative can make decisions for it.
The powers of the statutory representative should always be clearly defined and included in the contract, because if he acts outside his powers, he may be liable for damages. We will be happy to help you with the preparation of more than just these contracts.
The time for the statutory representative to make decisions arises when the statutory body cannot perform its duties. This can occur in situations such as the following:
Tip: As a business grows, subsidiaries are often created. What does it look like when a holding company is formed and how much does the subsidiary have to obey its mother? Not only that, you can find out in our article.
No, only the statutory body is entered in the commercial register. However, the statutory representative may be mentioned in internal documents and contracts. For example, in the case of schools or authorities, the name of the statutory representative may be mentioned in official documents or on the institution’s website.
The members of the board of directors of a public limited company are elected and dismissed by the general meeting. However, the Supervisory Board may also have this power if this is stated in the Articles of Association.
In the case of an association, the highest body is the general meeting, which normally elects its other members. However, some associations have in their statutes that only some members of the association can elect new members. The assembly elects new members at its meetings, usually with the consent of a majority of those present.
Removal can then take place, for example, at the behest of the highest authority. The statutory body also has the right to resign, subject to the time limits laid down in the contracts.
In the case of insolvency proceedings, the court may order that a member of the statutory body of an insolvent organisation may not hold office as a statutory body in any other organisation for a period of 3 years from the legal validity of the decision.
If you are unsure who can act on your behalf or how to set up representation in your organisation correctly, please contact us. Our law firm will also be happy to help you with legal issues relating to corporate governance and public administration.
A statutory body is authorised to act on behalf of a legal entity and is responsible for its management, whereas a statutory representative represents it only when necessary and his or her powers are limited by a specific mandate. The statutory body, for example the managing director of a limited liability company or the board of directors of an a.s., is entered in the commercial register, whereas the statutory representative is not. The scope of his/her authority is based on the law, internal regulations or contractual arrangements. In order to ensure the smooth functioning of the organisation and to avoid legal complications, it is necessary to set the rules of representation correctly. If you need legal advice in this area, contact our law firm.
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