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