Prokurist: Who is an authorised signatory in Germany?

Prokura: A definition

• Prokura (procuration) involves Handelsvollmacht (general commercial power of authorisation/attorney) and Vertretungsbefugnis (power of representation) for legal transactions
• When someone is granted a Prokura it’s entered into the Handelsregister and therefore is public knowledge
• The holder of a commercial power of attorney is called a Prokurist (authorised signatory) in Germany.
• This authorisation should simplify and speed up commercial transactions
• Legal certainty thanks to legal requirements

Who can hold a commercial power of attorney in Germany?

1. Only natural persons can be appointed as authorised signatories. For example, companies, associations, cooperatives or corporations (all legal entities) cannot be granted this type of commercial power of attorney.
2. An employment relationship is not required. Spouses or limited partners can also be authorised.
3. Power of attorney holders must have unrestricted legal capacity. This definition excludes, inter alia, minors.
4. A power of attorney cannot be transferred or divided according to specific areas. It is therefore strictly linked to the person to whom it is granted.
5. It may be granted jointly to several persons (Gesamtprokura).

Prokurist: What can an authorised signatory in Germany do?

In general, a Prokurist (authorised signatory) can carry out legal transactions in and out of court on behalf of commercial companies. This is a clear distinction from a Handlungsvollmachten (limited commercial authority), which is limited to a specific transaction.

The areas of responsibility are precisely defined in the Handelsgesetzbuch (commercial code). These include, among others:

• Hiring and firing staff
• Establish branch offices
• Concluding credit transactions and contracts
• Managing processes
• Perform all legal acts connected with the operation of a commercial enterprise

Prokurist: What can’t authorised signatory in Germany do?

Although a Prokurist has extensive rights of representation, some areas are excluded:

• Sign the Jahresabschluss (annual accounts/financial statements)
• Grant a Prokura
• Carry out basic transactions relating to trading operations, e.g.
  • file for insolvency,
  • make changes to the Handelsregister entry (e.g. changing the registered office or articles of association), or
  • wind up operations or sell the business.
• Selling or encumbering properties

Furthermore, a power of attorney may not be restricted externally.

How can I grant a power of attorney?

In principle, only Kaufleute (registered merchants that are considered to have a kaufmännisch business by the tax office) can grant a power of attorney. That is, only the owners of a Gewerbebetrieb (commercial enterprise) or the shareholders or  Vorstand (management board) of a company may grant Prokura (commercial power of attorney). This means that registration in the Handelsregister (commercial register) is a legal requirement.

Even if a new Prokura has not yet been registered with the district court, it is still valid. However, a business partner does not have to accept it. For this reason, the granting of a power of attorney should always be recorded in the commercial register immediately. A Prokura that is tacit (implied) or one granted by a handshake is invalid.

Gesamtprokura: What is a joint power of attorney

More than one person can have a Gesamtprokura (joint power of attorney). Normally, this type of authorisation means that the signatories can only act together. That is, none of them can represent the company individually. Special forms are also common, such as a half-joint power of attorney. This is when some signatories are entitled to represent the company independently and others are not.

Filialprokura: Power of attorney for a company branch

A Filialprokura is a type of authorisation that restricts the rights of the authorised signatory to one or more branches. This restriction must be noted in the Handelsregistereintrag (commercial register entry) of the branch concerned. This addition is called a Filialklausel (branch clause)

How can I limit the rights of a Prokurist?

It is not possible to limit the scope of a Prokurist (authorised signatory). This applies to restrictions on:

• certain types of transactions,
• certain locations,
• defined circumstances, and
• defined timelines.

Even if there are internal agreements restricting the rights of an authorised signatory, they are ineffective when it comes to external business relations (Section 50 HBG). This rule applies even if the restrictions are known to a business partner, e.g. before a contract is concluded.

Geschäftsführer vs Prokurist: How managing directors & authorised signatories differ

The most noticeable difference between these commercial positions is that Prokuristinnen (authorised signatories) must ‘sign’ in a way that makes their position recognisable to the outside world. This means that they must sign referencing the power of attorney. They typically use the abbreviation ppa. (per procura).

However, the differences don’t just stop there. Compared to authorised signatories, Geschäftsführer (managing directors) have more rights and obligations and are liable for errors.

How can I set up a Prokura?

The power of attorney must be granted personally and expressly by the entrepreneur (Kaufmann/Kauffrau) or the representative of a commercial enterprise. In the case of a GmbH, the shareholders must pass a shareholders’ resolution.

The new power of attorney must then be registered with the Handelsregister (commercial register). This requires a notary: the notary draws up the application, certifies the signatures and forwards everything digitally to the relevant Amtsgericht (district court).

Does the Prokura cost anything?

Yes, because you need a notary and they charge for their time. There are also fees for the services of the Amtsgericht. This also applies to the registration, transfer and cancellation of the power of attorney.

Registration costs

Notary fees for registration vary depending on the legal form and value of the transaction. You can expect to pay between €100 and €200 per new authorised signatory. An exchange, i.e. replacing a current authorised signatory with a new one, costs slightly more.

There is also a €40 court fee for registering an authorised signatory. If you register more than one authorised signatory at the same time, you will be charged €30 for the second and each subsequent registration.

How to revoke an authorisation

To revoke the Prokura, the authorisation must be revoked vis-à-vis the authorised signatory. This can be done informally at any time. In special cases, the power of attorney also expires without revocation:

• Termination of employment
• Legal incapacity of the authorised signatory under § 104 No. 2 BGB
• Insolvency
• Dissolution of the company or cessation of business activities
• Death

In any case, the Handelsgericht (commercial court) must also be notified of the cancellation of a power of attorney.