February 12, 2024

The Prokura is a power of attorney under commercial law for representation within the meaning of Section 167 of the German Civil Code (BGB), i.e. it authorises the Prokurist to act in legal transactions on behalf of the merchant who has granted him the Prokura. Through his actions, he can effectively conclude legal transactions for the merchant, from which the merchant is obligated. The content and scope of the power of attorney are stipulated by law in §§ 49, 50 HGB.

Prokurist / PoA

Rights of the Prokurist (authorised signatory)

According to § 49 Para. 1 HGB, the authorised signatory is entitled to carry out all types of judicial and extrajudicial transactions and legal acts that the operation of a commercial business entails on behalf of the principal. It does not matter which specific trade the principal carries out, but all transactions associated with the operation of any trade are covered.

In particular, the power of attorney therefore authorises the conclusion, execution and termination of contracts.

The authorised signatory may therefore, among other things

  • hire and fire employees
  • conclude works agreements in accordance with the Works Constitution Act
  • grant powers of attorney
  • take out or grant a loan
  • assume a guarantee
  • make a donation
  • open up new business sectors
  • establish or close branches/subsidiaries or parts of a business
  • relocate the registered office
  • make product changes or introduce/change production methods
  • acquire or sell other companies and shareholdings
  • acquire real estate and encumber it, e.g. to secure the purchase price
  • rent or lease properties
  • unencumber properties and pledge or assign rights (in particular mortgages or land charges) to properties
  • agree to changes in the ranking of property rights
  • conduct legal proceedings insofar as they relate to the operation of the commercial business and an object covered by the power of attorney

Excluded from the transactions that the authorised signatory may carry out are the so-called basic transactions, i.e. legal transactions or legal acts that affect the existence, legal form and legal structure of the business and are therefore reserved for the business owner.

Therefore, the authorised signatory may not

  • change the object of the company by legal transaction
  • close down the business
  • sell the business
  • file for insolvency
  • grant procuration themselves
  • change the company name
  • make applications to the commercial register

According to § 49 Para. 2 HGB, the authorised signatory may not conclude any transactions through which the businessman's property is sold or encumbered unless he has also been expressly authorised to do so. This applies to both the obligatory transaction (e.g. the purchase agreement) and the disposal (e.g. transfer of ownership).

The authorised signatory may also not conclude transactions in which he is involved on both sides, namely on the one hand as a representative of the principal and on the other hand himself or as a representative of a third party ("in-itself transaction"), if he has not been granted permission for such transactions in accordance with Section 181 BGB.

Duties of the authorised signatory

According to Section 51 of the German Commercial Code (HGB), when concluding transactions, the authorised signatory must sign in such a way that their name appears next to the company name with an addition indicating that they have power of attorney.

The authorised signatory should therefore sign by placing the abbreviation "ppa" (or the addition "per Prokura", or similar) in front of his signature below the name or stamp of the principal.

If a joint power of attorney exists, the authorised signatory must act in accordance with § 48 Para. 2 HGB: he is then only authorised to represent the principal together with one or more other authorised signatories, so that they must always act jointly. However, for joint action to be effective, it is also sufficient to agree this with the other joint authorised signatories in advance or to have it approved by them later.