Chapters of the article
A power of attorney is a special case of granting a power of attorney. Its significance for you as a businessman lies mainly in the fact that it facilitates negotiations concerning the operation of the company or one of its branches. You do not then have to (or the statutory body does not have to) take all legal actions regarding the operation in question, and there is no need to repeatedly issue special powers of attorney.
Your business partners are also in the clear. They can rely on the fact that a proxy, registered in the commercial register, is authorised to act for you and there is no need to produce a power of attorney.
Tip: Are you going to vet a company before you do business with it? How to search the commercial register and what you can find in it, we have explained in our article.
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You can authorize a proxy to perform all legal acts that occur in the operation of the branch (or business establishment), including those for which a special power of attorney is otherwise required. In the case of a business establishment with one or more branches, or where the company consists of several business establishments, a power of attorney may be granted only for a particular branch or establishment.
Basic conditions for granting a power of attorney:
- A proxy may only be granted by a businessman registered in the commercial register. No other entity can grant a proxy.
- Only a natural person may be granted a proxy; a legal person cannot be a proxy.
Scope of the proxy and its limitations
As already mentioned above, a proxy is entitled to all legal acts occurring in the operation of a business establishment or a branch on the basis of a proxy. Thus, in addition to ordinary commercial contracts, the proxy may enter into promissory notes, take out loans or sell the assets of the branch.
An important limitation is that the power of attorney does not include the power to alienate or encumber immovable property. However, the power of attorney may be extended to include such acts (or such power may be limited by fixing a certain amount of the price of the property or by setting other conditions). However, if this is not stated in the power of attorney, then the proxy is not authorised to do such acts.
Furthermore, the proxy may not perform acts on behalf of the statutory body that concern so-called status matters of the entrepreneur – such as convening a general meeting.
The Civil Code does not provide for any other limitation of the proxy than the above. If you would like to limit the proxy to, for example, the amount up to which he can take out loans or perform other legal acts on your behalf, then such a proxy cannot be entered in the Commercial Register. However, such a move would be resolvable as a representation under a power of attorney.
A proxy cannot transfer the proxy to someone else or grant another proxy.
Exercise of the proxy’s activity
Aproxy must perform his or her duties personally and with due care, which requires an active approach to the performance of duties, with the proviso that lack of knowledge necessary to carry out legal acts or lack of time is not an excusable reason for not exercising due care. A procurator therefore assumes a relatively heavy responsibility which he should take into account. Part of this care is automatically presumed to include loyalty, which requires the proxy to act solely in the interests of the business and not to mix his or her actions as a proxy with his or her own interests (or those of others).
Form of proxy
The granting of a proxy is based on an agreement between the proxy and the entrepreneur that the proxy will represent the entrepreneur by way of proxy in legal proceedings in connection with the operation of the entrepreneur’s business. No written form is required for this agreement (as opposed to the granting of the proxy itself).
Ideally, the entrepreneur should conclude an unnamed contract with the proxy for the representation of the entrepreneur by proxy, in which the parties also agree on the manner of exercising the proxy and, inter alia, whether the contract will be for a consideration or whether the proxy will exercise his/her activity free of charge. And if the contract will be remunerative, the amount of the proxy’s remuneration.
Tip: The remuneration for acting as a proxy should be considered as income from employment subject to 15% advance tax.
If the entrepreneur has not entered into the aforementioned agreement with the proxy, then the provisions of the Civil Code on injunction may reasonably apply to their relationship.
How to grant a proxy
The power of attorney itself must always be granted in writing. In the case of a limited liability company, the approval of the granting and revocation of a proxy falls within the competence of the general meeting (unless the articles of association provide otherwise).
In the case of other companies, this is not provided for, but the approval and revocation of a proxy may be entrusted to the general meeting or other body by the company’s articles of association. Therefore, it is always necessary to first check the constituent documents, within whose competence the approval of the granting of a proxy falls. If nothing else is stated, the granting of a proxy falls within the competence of the entrepreneur’s statutory body or directly within the competence of the entrepreneur if he is a natural person.
Content and model of the proxy
Various models for the granting of a proxy can be found on the internet, however, it is advisable to consult a lawyer about the specific form, as the form may vary according to the scope of the authorisation. The power of attorney must explicitly state that it is a proxy. The scope of the proxy’s authority does not need to be expressly stated, as long as the statutory scope is respected.
Entry of the proxy in the commercial register
The grant of a proxy to a proxy must be entered in the commercial register, however, unlike the previous legislation, the entry is only declaratory. The proxy is therefore already effective at the moment of its granting. Until the moment of registration of the proxy in the Commercial Register, the proxy must prove his/her authorisation to a third party (e.g. by submitting a document granting the proxy).
Signature of the proxy
The proxy shall sign by adding his/her signature to the name of the entrepreneur and an indication of the proxy. Should the proxy be granted for a single branch or one of several business establishments, he/she shall also add the indication designating the branch or business establishment.
The addendum may take various forms, as a rule, it is explicitly stated as “proxy”, “in procura”, “per procuram”, or the abbreviations “ppa” or “p.p.” etc.
Granting of a proxy to more than one person
Proxies may also be granted to more than one person. In such a case, three possibilities may arise as to how the proxy will be exercised:
- each proxy is entitled to represent the company independently,
- the consent of more than one proxy is required for all or some of the acts, at least two of them together,
- the representation and signing requires the consent of all proxies.
In the event that you have granted a proxy to several persons and have not specified otherwise when granting the proxy, each of them shall represent you separately.
When does a power of attorney expire?
The Civil Code does not regulate, with exceptions, the manner of termination of a proxy. However, there is no doubt that a proxy terminates first of all:
- by its revocation or termination,
- death of the proxy,
- by declaring bankruptcy on the property of the entrepreneur,
- dissolution of the entrepreneur without a legal successor,
- transfer or lease of the business establishment or branch for which it was granted.
On the death of the entrepreneur, the proxy shall not terminate unless otherwise agreed.
Whenever a proxy is terminated, you should not forget to apply for its deletion from the commercial register.