Have you ever heard about Prokurist in Germany?

The prokorist, which has Latin roots, is defined as the legal representative of a company in Germany.

As a prokurist (authorized officer) of a limited liability company in Germany, you are different from other employees of the company because you have a business power of attorney. This power of attorney allows you to act instead of the CEO of a department or company. In this position, the authorized officer can significantly influence the company’s business process.

Now, the question is, what is the scope of the prokurist’s authority, what are the requirements for becoming an authorized officer in a German company, and what are the differences between a prokurist and a CEO of a company?

In this article of Wise Business Group, we will answer these questions.

 The powers of the Prokurist at the transactions level in Germany

• Concluding, executing, and terminating the contract
• Recruitment
• Borrowing and lending
• Financial aid and assumption of responsibility
• Stock transactions and check declaration
• Litigation

The powers of the Prokurist at the organizational actions level in Germany

• Product change
• Introduction of new production methods
• Establishment of branches or subsidiaries

Restrictions for Prokurist in Germany

However, this Extensive freedom of action has its own limitations for the authorized officer (Prokurist) in Germany. For example, he is not responsible for the organizational rights of the company including the following:  

• Stopping the company’s operations
• Selling the Company
• Creating a file for bankruptcy
• Trademark registration
• Accepting, terminating, and bringing out of shareholders
• Giving himself a power of attorney
• signing financial statements

Read more on WBG: Business formation in Germany

The differences between CEO and the prokurist in Germany

CEO and Prokurist (the authorized representative of the company) in Germany – What makes them different?

Now it is time to examine the differences between the CEO and the prokurist in Germany. Both of them are foreign representatives of a company. But what is the difference between these two representatives? Or rather, which authorities does the CEO have which do not exist for the authorized officer?

Also, does the CEO face a higher risk in his decisions? For example, can he be personally responsible in certain cases? How much the CEO of GmbH is different from the prokurist in terms of related options for action? Is the authorized officer a “manager without responsibilities”?

According to section 6 section 1, 35 paragraph 1 of the GmbH Act in Germany, the managing director is an organ designated to manage and represent the company. He is the so-called “boss” of the company. In contrast, even if he has very extensive power, the authorized representative is not a member of the company, but always just an employee. He is therefore likely to be considered the “right hand” of the company (However, German companies do not necessarily have to have one prokurist).

Management

The CEO is entitled to run the company and take action against the employees (That is, the CEO also puts the company against the prokurist, who is an employee of the company. But the opposite is not true).

This is the meeting of the company’s shareholders that delegates these tasks internally to the CEO. It can also impose restrictions on him internally. That is, it can arrange (for example, through regulations) that the CEO must ask shareholders for approval before taking specific action. It may also be decided at the shareholders’ assembly that the managing director may not act alone, but only act with the other managing director (Companies in Germany can have more than one managing director).

Representation authority

On the other hand, representative power which is a foreign right in legal transactions is unlimited for the CEO against third parties in Germany (i.e. foreign relations). This means that a person entered into the German business register as a managing director can represent the company in all foreign affairs.

Isn’t this a contradiction with the previous paragraph which states that the shareholders’ assembly can impose restrictions for the CEO?

No, it is not a contradiction; The CEO can take all actions for GmbH, including actions against third parties. However, if he is given an instruction at the shareholders’ assembly which limits his authority, his actions will continue to be effective under GmbH law. But if it is contrary to internal agreements, the CEO will be personally liable for damages to the GmbH, i.e. the shareholders have the right to sue.

But the prokurist (authorized officer), unlike the CEO, is not appointed by the shareholders’ assembly. Instead, the CEO appoints him in GmbH. Here, there is also a possibility that the shareholders’ assembly reserves the right to consent to the grant of power of attorney; i.e. to agree or disagree with this appointment. The prokurist may also be ordered to act only in coordination with a managing director or another official representative.

Read more on WBG: Office management in Germany