Procuration

What it means

Procuration is a special authority covering all legal acts in running the business. A holder can sign contracts and deal with banks and authorities, but may sell real estate only if expressly empowered.

It is entered in the commercial register and its scope cannot be limited against third parties. Internal instructions bind the holder and the company, not the counterparty.

Under the Commercial Code procuration can be granted to one person or to several jointly, in which case they must act together. The holder signs by adding their name and a suffix showing the procuration to the business name. A counterparty can see from the signature alone that a procurator rather than the director is acting, and can check the scope of that authority.

How it works in practice

It is used where a manager runs the business but the owner remains director: with foreign owners, during a generational handover, or when the director is away for long periods.

Unlike a power of attorney it is visible in the register, so partners can verify it. It ends on revocation and deletion from the register, not by an internal decision alone.

When procuration is registered we also think about what does not follow from it automatically. The bank needs new specimen signatures and rights set up in online banking, access to the company’s electronic mailbox usually has to be granted to the holder separately, and for tax filings we check whether the office records them as a person authorised to act.

What to watch out for

The holder is not a statutory body and does not carry the director’s liability for filing for bankruptcy or for keeping the books. That stays with the director whoever actually runs things.

A director who grants procuration and then does not supervise the holder is not released from liability: due care has to be shown in both choosing and overseeing. If the procurator signs a bad contract the company is bound by it, and the shareholders can turn to the director for the loss.