Procurator in a limited liability company

People who decide to join the structure of a limited liability company often ask themselves whether it is worthwhile to have a prokurent in the company. They wonder what benefits appointing such a proxy may bring, what risks might be involved, and if so, what costs they will have to bear as a result of their decision. Anyone considering having this particular form of proxy in their firm should become familiar with exactly who a prokurent is, the types of prokura that exist, what a prokurent’s duties in the company may include, and how to properly and legally appoint such a proxy. Acquiring knowledge on these issues will allow the company to make the best decision tailored to its needs and to carry out the entire procedure correctly. Thanks to elementary information about this type of proxy, those operating within the company will be able to fully utilise the opportunities offered by having a prokurent. Additionally, it should be noted that having a basic understanding of the role of the prokurent and their responsibilities will help avoid misunderstandings and irregularities concerning their activities after appointment. In this article, we will present the most important information about this special kind of proxy, outline its advantages and possible drawbacks, and explain the key elements of the appointment procedure.

Who is a prokurent and what types of prokura exist?

The institution of prokura is regulated in Chapter III of the Civil Code, specifically in Article 109¹ § 1, which states that “Prokura is a power of attorney granted by an entrepreneur subject to the obligation of entry in the Central Registration and Information on Business Activity (CEIDG) or in the register of entrepreneurs of the National Court Register (KRS), which authorises the proxy to perform judicial and extrajudicial acts related to the operation of the enterprise.” Thus, as indicated by the provision, the prokurent is a special kind of proxy, more precisely a commercial proxy, who can only be appointed by an entrepreneur registered in CEIDG or KRS. The Civil Code distinguishes three types of prokura: sole, joint, and mixed. In the case of the sole prokura, the power of attorney is granted to only one person, who is authorised to act independently within a defined scope. Joint prokura involves appointing more than one prokurent, with each authorised to act only jointly with the others. The mixed prokura, also called improper prokura, requires the prokurent to act together with another member of the management board. Additionally, Article 109⁵ of the Civil Code recognises a fourth type — so-called branch prokura, where the prokurent operates only within matters registered in the branch register of the enterprise.

What scope of powers does a prokurent have in the company?

Analysing the provisions, it can be concluded that the prokurent has a wide range of powers and competencies in representing the company externally, because unless we specify restrictions when appointing them, they may represent the company alone, even in cases where management board members’ authority is sometimes limited. Pursuant to Article 109¹ § 1 of the Civil Code, the prokurent is empowered to perform judicial and extrajudicial acts connected with running the business. This means, for example, that they may conclude contracts on behalf of the company, incur liabilities, represent the company before authorities, clients, and courts, or employ staff. However, their powers are legally limited: they cannot grant further prokura or general powers of attorney, sell the enterprise or real estate belonging to the enterprise, lease the enterprise temporarily, or encumber real estate belonging to the enterprise. Therefore, while the prokurent may broadly act on behalf of the company, they are not unlimited. There is also the possibility, when appointing a prokurent, to shape their scope of authority differently than directly provided by law. Consequently, if you are considering appointing a prokurent and wish to define their powers differently or are unsure whether a particular act falls within their competence, it is advisable to consult a legal firm for advice to tailor the power of attorney optimally.

How to appoint a prokurent?

According to Article 109² of the Civil Code, the prokura, under pain of nullity, must be granted in writing. The document granting the power of attorney must explicitly state the authorisation for the person to represent the specific entity. Additionally, in the case of a prokurent in a limited liability company, pursuant to Article 208 § 6 of the Commercial Companies Code, the consent of all management board members must be obtained. The person receiving the power of attorney must also agree to it. Only a natural person with full legal capacity can become a prokurent. It is also important to remember that the role of prokurent cannot be combined with the function of a management board member. Once the prokura is properly granted, it must be registered in CEIDG or KRS. However, it is worth noting that the Supreme Court in the ruling of 20 October 2005 (case ref. II CH 120/05) held that the prokura is valid even if it has not been entered in the relevant register. From an entrepreneur’s perspective, the prokura may be revoked at any time by authorised persons. It also expires upon the death of the prokurent, removal of the entity from CEIDG or KRS, or in the event of the company’s liquidation. Revocation or expiry of the prokura must also be recorded in the relevant register.

Summary

In summary, it can be stated that a prokurent can be a useful person in a company because they can represent the company externally to a wide extent without involving management board members in their activities. Such a solution relieves the governing body of the responsibility of running the company day to day and allows them to dedicate more time to internal matters. It also expands the number of persons who can act on behalf of the company without the need to increase the size of the management board. Furthermore, thanks to the prokurent’s activity, the company can gain better organisation. The prokura facilitates and accelerates performing certain actions for the company. Another advantage of appointing a prokurent is the ease of their revocation, which can be done at any time by authorised persons. Regarding the drawbacks of this proxy, it is worth mentioning their limited civil and criminal liability, as well as the lack of personal liability for the company’s obligations. Hence, despite having extensive powers, the prokurent’s responsibility for their actions is quite narrow. It should be emphasised that this may lead to the prokurent carrying out certain activities with less diligence than a management board member, whose liability is much broader. Therefore, having a prokurent can be beneficial for the company, but it is crucial to appoint a responsible person who will act in the company’s best interests.