What is procuration and why is it important when you buy from a company?

Prokura is a special, legally regulated type of authorization for representing a commercial company, broader than an ordinary power of attorney, and is entered into the court register. According to the Companies Act, a procurator without special authorization from the company cannot alienate or encumber the company's real estate, nor can they make statements initiating bankruptcy proceedings. It is important to understand that this special authorization does not have to be entered into the court register — the law does not require it. Therefore, the mere fact that a person is registered as a procurator is not enough to know if they can sell real estate; it is necessary to check whether there is a special authorization for that specific transaction.

When buying real estate from a commercial company, the person negotiating and signing the contract on behalf of the seller does not necessarily have to be the director. Often, it is a procurator — a person to whom the company has granted special, registered authorization for representation. Prokura grants very broad powers, but the law explicitly stipulates that for the sale or encumbrance of company real estate, the procurator needs additional, special authorization — and this authorization does not have to be visible in the court register. In this guide, we explain what procuration is, how it differs from an ordinary power of attorney and from the function of a director, and what a buyer must pay attention to in order not to sign a contract with a person who does not have actual authorization for it.

Contents

• What is procuration and how does it differ from a power of attorney
• Limitations of procuration in real estate sales
• Individual and collective procuration
• How to check procuration before signing a contract
• Risks if special authorization is not checked
• How Regent can help you
• Frequently Asked Questions

Key Takeaways

• Prokura is a special, legally regulated type of authorization for representing a commercial company, broader than an ordinary power of attorney.
• Prokura is entered into the court register, just like the company director's information.
• A procurator without special authorization cannot alienate or encumber the company's real estate, nor make statements that initiate bankruptcy proceedings.
• Special authorization allowing a procurator to sell or encumber real estate does not have to be entered into the court register.
• Prokura can be individual or collective, where for a specific action, the consent of other collective procurators is required.
• A procurator is not the same as a company director — a procurator is a commercial agent, not a member of the management board who runs the company's business.

What is procuration and how does it differ from a power of attorney

Prokura is a special type of commercial power of attorney granted by a commercial company to a specific person (procurator), which, unlike an ordinary power of attorney, must be entered into the court register and has a legally predetermined, broad scope. While the scope of an ordinary power of attorney depends exclusively on what is written in it, the scope of procuration is largely prescribed by the law itself. According to the Companies Act, a procurator can conclude contracts and undertake legal actions in the name and on behalf of the company, and represent the company before administrative bodies, public law institutions, and courts. For a real estate buyer, the practical difference is as follows: when a person in front of you claims to be authorized to sign a contract on behalf of the company, that authorization can stem from three different sources — from the function of a director, from registered procuration, or from a special power of attorney for a specific transaction. Each of these three sources has a different scope and a different method of verification.

Professional advice: Never assume that "procurator" automatically means the same as "director" in terms of authority — the scope of procuration is legally broad, but it has important exceptions that directly affect real estate transactions.

Limitations of procuration in real estate sales

Prokura grants the procurator very broad powers, but the law explicitly stipulates that a procurator without special authorization from the company cannot:

• alienate or encumber the company's real estate (for example, sell real estate or establish a mortgage on it)
• make statements or undertake legal actions that initiate bankruptcy proceedings or other proceedings leading to the termination of the company
• grant another person a power of attorney to conclude transactions based on their procuration

Additionally, a procurator without special authorization cannot conclude a contract "with himself" — meaning simultaneously representing the company and acting as the other contracting party, in their own name or on behalf of a third party. The key thing a buyer must understand: this special authorization does not have to be entered into the court register. The registration includes the granting of procuration, its revocation, and information about the procurator, and the only specific limitation registered is procuration related to the operation of a branch. Special authorization for the sale of specific real estate usually exists as a separate company decision or power of attorney, which is not visible in the excerpt from the court register. Therefore, the mere fact that a person is registered as a procurator does not mean they can or cannot sell real estate — additional document verification is required for that.

Professional advice: Do not conclude from the court register that a procurator "certainly can" or "certainly cannot" sell company real estate — the register simply does not show this. Always request proof of special authorization for that specific legal transaction.

Individual and collective procuration

Just as with representation through a director, procuration can be structured in two ways. If multiple procurators are appointed, and it is not explicitly stated that it is a collective procuration, each of them can validly represent the company individually, with their signature. If collective procuration is explicitly determined, the procurators must act together, whereby the action of one collective procurator can be valid with the explicit prior or subsequent consent of the other collective procurators. The type of procuration — individual or collective — is visible in the excerpt from the court register, along with the name and details of the procurator. It is also worth noting that a procurator is not the same as a company director. The director, or management board, manages the company's affairs and represents it based on their function, while a procurator is a commercial agent whose powers and limitations are explicitly prescribed by law, regardless of how broadly they act in the company's daily operations. This distinction is often incorrectly equated in practice, which can lead the buyer to a wrong conclusion about the actual powers of the person they are negotiating with.

Professional advice: Before negotiations, check whether the person presenting themselves as authorized to represent the company is registered as a director or as a procurator — these are two different legal positions with different scopes of authority.