The Supreme Court has recently confirmed existing case law with
respect to those who are entitled to act on behalf of a company.
Generally, a company may act through its statutory body (direct
acting) or through its empowered representative (indirect
acting).
According to the existing case law of the Supreme Court it is
unacceptable for a member of a statutory body to simultaneously act
as the company's statutory representative. Furthermore, if a
company's memorandum of association states that at least two
members of the statutory body shall act together on behalf of the
company, then, it is forbidden, for such members to grant a general
power of attorney for one member to act alone.
The Supreme Court's judgement 32Cdo 4133/2009 confirmed the
pre-existing legal opinion that an authorisation to a particular
member of the statutory body to act on behalf of the company cannot
be extended by a general power of attorney to other members of the
company's statutory body, which were not empowered by its
memorandum of association to act in a particular situation.
However, according to the new judgment, in certain cases when it is
impossible for the member of the statutory body to act on behalf of
the company (e.g. due to illness), the body is allowed to grant a
power of attorney to another member of the statutory body, but only
with respect to the particular situation. In such a case, the
member of the statutory body does not act as representative of the
company but directly on behalf of the company and therefore should
be aware of all consequences resulting from such acting. i.e.
greater responsibility to the company.
This issue frequently transpires during the due diligence process.
Companies are often not aware that agreements and arrangements
signed under a power of attorney might be found invalid. Given the
judgment of the Supreme Court it is advisable to pay attention to
this issue and to confirm that signatories are authorised to sign
to ensure the valid execution of agreements.
Law: Act No. 513/1991 Coll., Commercial Code
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 24/10/2011.
