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The success of a company is not only based on innovation and strategy, but above all on smoothly functioning day-to-day business. For this to succeed, responsibilities must be clearly defined and delegated. This is where the power of attorney comes into play: it makes it possible to efficiently distribute operational decisions across several shoulders. This article explains exactly what a power of attorney is, what types there are, how it is granted, when it expires and how it differs from a power of attorney. It also contains practical tips on signature regulations and integration into the employment contract.
"If someone is authorized to operate a commercial business or to carry out certain transactions belonging to a commercial business without being granted power of attorney, the power of attorney shall extend to all transactions and legal acts that the operation of such a commercial business usually entails." (§ 54 HGB)
This wording forms the legal basis of the power of attorney. In practice, this means that a person who has been granted a power of attorney may carry out typical business transactions independently - such as placing orders, preparing contracts or making operational decisions. What exactly is covered depends on the type of power of attorney - whether it applies to all usual tasks, is limited to a specific type of transaction or only relates to a single transaction.
The following types of power of attorney can be distinguished. A detailed description of these types of power of attorney with examples can be found in the following chapter.
The legal basis is § 54 HGB. Important to know: A power of attorney does not have to be entered in the commercial register.
The purpose of the power of attorney is to make operational processes more efficient. This allows decision-making processes to be accelerated, queries to be minimized and internal resources to be deployed in a more targeted manner. It covers the company's ordinary business - including, for example, purchasing, concluding contracts or organizational tasks.
However, the following are excluded:
Restrictions on the power of attorney only apply to third parties if they were aware of them or should have been aware of them. This means that business partners are only legally bound by the restrictions if they were informed of the internal limitations or were able to clearly recognize them.
Significant transactions can also be covered by the power of attorney, provided they are customary in the respective company. Decisions that are economically or legally far-reaching are considered to be significant - such as larger contracts, orders with a high financial volume or long-term obligations. The decisive factor is whether such transactions are part of the typical area of responsibility of the authorized person and occur regularly in the respective company.
If the authorized representative acts within the scope of his power of attorney, he thereby obligates and entitles the entrepreneur. The latter is liable for the actions of his authorized representative in accordance with § 278, § 831 BGB. If the scope of the power of attorney is exceeded, the business partner is also liable - provided he could or should have recognized that the authorized representative acted without authorization. Unauthorized actions can lead to the personal liability of the authorized representative.
The general power of attorney, also known as a general power of attorney, authorizes all ordinary transactions that arise within the scope of the entire commercial business. It is the most comprehensive form of power of attorney and is typically granted to executives who regularly have to make operational decisions - such as department heads, purchasing managers, division managers or project managers with budget authority. Such an authorized representative can, for example, conclude contracts with customers or suppliers, hire personnel or control internal processes - everything that is part of normal business operations. Granting this power of attorney offers companies the advantage that central employees can carry out their area of responsibility independently and within the scope of defined powers without having to obtain separate approval for each decision.
Example: A purchasing manager may conclude framework agreements with suppliers.
The type power of attorney - also known as a type power of attorney - is limited to a specific type of transaction that is typical for the company. It is particularly suitable for specialized roles, such as purchasing, sales or accounting employees. The person concerned may act independently within the scope of their power of attorney, e.g. initiate orders or approve invoices. This form of power of attorney enables a clear and targeted delegation of responsibility and helps to increase efficiency. At the same time, the liability risk is reduced as the power of attorney is limited to a clearly defined area of responsibility.
Example: An employee in sales receives a type authorization for all sales contracts.
The special or individual power of attorney applies exclusively to a specific, one-off transaction. It is often granted in special situations, for example when an otherwise unauthorized person is to carry out a single transaction by proxy. This type of power of attorney is particularly useful if the action is clearly definable and non-recurring. It is usually granted in writing in order to clarify the scope and validity. The narrow limitation to a single transaction minimizes the risk of misunderstandings or unauthorized action.
Example: An assistant may sign a leasing contract once.
A sub-power of attorney describes the authorization of an authorized representative to transfer the power of attorney granted to him or her in full or in part to another person. This is generally not permitted within the scope of the power of attorney - unless the original principal expressly and demonstrably agrees. This regulation serves to protect the company, as it ensures that only authorized persons with defined authority act. Without such consent, any declarations or actions by a sub-authorized representative would not be legally effective and could lead to liability issues.
The granting of a power of attorney is a formal act that can be carried out verbally or in writing. It is usually granted by managing directors, owners or authorized signatories. These persons have the corresponding authority to authorize others on behalf of the company. It is crucial that the authorized representative is precisely informed about his or her area of responsibility and legal powers. The power of attorney can be granted expressly, i.e. communicated directly, or implied, i.e. by conclusive behavior.
In order to avoid misunderstandings, it is advisable to use the written form, ideally as part of the employment contract or in the form of a separate power of attorney document. In this way, the scope, type and duration of the power of attorney can be clearly recorded. This creates transparency for all parties involved.
In special cases, so-called acquiescence or prima facie authorization can occur. This occurs when a company tolerates an employee acting as an authorized representative over a longer period of time - or if the organization negligently creates structures that give the appearance of a power of attorney. In both cases, the good faith of the business partner is protected and the company must accept responsibility for the act.
There are many different signature regulations in the corporate context (e.g. for internal representation or external powers of attorney). In the case of powers of attorney, the following applies: The signature is usually made with the addition "i. V.", which indicates the legally binding representation.
Like any power of attorney, the power of attorney is not valid indefinitely. It can end in different ways - for example, automatically after the completion of an individual transaction or through active revocation in the case of a long-term power of attorney.
A special or individual power of attorney expires automatically as soon as the associated transaction is completed. In this case, no additional declaration or documentation is required. The situation is different with general or special powers of attorney: These can be revoked by active revocation by the principal. The revocation should always be made in writing and must be clearly communicated, especially to external business partners. This is crucial in order to avoid a possible legal appearance - i.e. the appearance of a continuing power of attorney - and the resulting liability risks.
Other reasons for the power of attorney to expire include the termination of employment, the return of a granted power of attorney document or the insolvency of the company. Transparency towards third parties is also important here, as business partners could act in reliance on an existing power of attorney.
Important: A revocation must be made clear to third parties in order to avoid an appearance of right.
Procuration is a particularly far-reaching form of authorization under commercial law and is regulated in §§ 48 ff. HGB (German Commercial Code). It allows the authorized person to carry out almost all judicial and extrajudicial transactions on behalf of the company in a legally binding manner. A power of attorney may only be granted by the business owner or the authorized representative body of a company (e.g. the management of a GmbH or the management board of an AG) and must be entered in the commercial register. Due to its comprehensive scope, it is a key instrument in larger companies where managers require far-reaching decision-making powers.
According to Section 54 UGB, the power of attorney in Austria largely corresponds to the German regulation. Here too, restrictions only apply if business partners are aware of them.
Art. 462 CO: Authorized representatives may carry out all ordinary transactions. Loans, bills of exchange and lawsuits require special authorization.
In the Anglo-American world, the "special agency" is similar to the special power of attorney. The scope depends strictly on the written grant.
The power of attorney is an efficient instrument for organizing day-to-day business operations. It makes it possible to involve employees in decision-making processes in a legally binding manner and thus relieves the burden on management. Clearly defined powers of attorney, documented signature regulations and transparent communication with third parties are crucial for their legally compliant use. A digital solution for contract and power of attorney management, such as ContractHero, makes this process considerably easier: individually configurable user roles allow powers of attorney to be assigned in a targeted and traceable manner so that employees only have access to those contracts and areas for which they are authorized. Structured filing plays a key role here, as it makes it possible to clearly assign authorizations, keep an eye on validity periods and quickly provide evidence if necessary. Automated reminders for expiration dates also reduce the risk of expired or forgotten authorizations.
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