What can a procuration holder sign, and what does procuration not cover?

The business is growing, the managing director cannot keep up with signing, and someone in management needs to take over part of the work. Procuration is the broadest power of representation recognised by commercial law. That makes it especially important to understand its boundaries.

What the procuration holder may sign

By granting procuration, an entrepreneur authorises the holder to perform all legal acts arising in the operation of the business, including those otherwise requiring a special power of attorney. Procuration may be granted only to an individual.

— Section 14(1) of the Commercial Code, unofficial translation

In practice, this covers supplier and customer contracts, orders, complaints, employment acts and acceptance of performance: ordinary business operations without a separate power of attorney for each act. The holder signs by adding an indication of procuration and their signature to the entrepreneur’s business name.

What procuration does not cover

Procuration does not include authority to dispose of or encumber real estate unless that authority is expressly stated in the grant.

— Section 14(2) of the Commercial Code, unofficial translation

The holder therefore cannot sign a sale of company property or grant a mortgage to a bank unless expressly authorised in the grant and registration. Acts unrelated to business operations and decisions reserved to shareholders or the general meeting are also outside procuration. The holder is not a statutory body and does not replace the managing director where the law specifically requires that director. Procuration also ends by law when the company enters liquidation (Section 75b(2)); see liquidating an s.r.o. step by step.

Internal limits do not bind third parties

Internal instructions restricting procuration have no legal effect against third parties (Section 14(3)). If the holder signs beyond an internal instruction, the company remains bound. The breach is addressed internally, typically through the holder’s liability for damages. Internal rules are useful for control and accountability, but they do not narrow the statutory external scope of procuration even if written into the grant. Joint procuration by several holders may be chosen, as may the statutory variant authorising the disposal or encumbrance of real estate. If narrowly defined subject-matter or financial authority is required against third parties, an ordinary power of attorney may be more suitable.

What the grant should contain and how registration works

In an s.r.o., the general meeting appoints the procuration holder unless the memorandum provides otherwise (Section 125(2)). The grant specifies how the holder acts, alone or jointly; express authority or exclusion concerning real estate; and the signing method. The same details appear in the registration application. Procuration takes effect only on Commercial Register entry (Section 14(6)), so the holder cannot act for the company beforehand. Czech law takes the opposite approach: under Section 450 of the Civil Code, Act No. 89/2012 Coll., procuration arises on being granted and registration is declaratory. Businesses operating in both countries must plan the holder’s start separately for each jurisdiction.

How we can help

We prepare the grant, general meeting decision and registration application through our granting procuration service, handle registration through Commercial Register changes, and coordinate signing rules across documents through s.r.o. corporate documentation. If you are unsure whether procuration or an ordinary power of attorney is right, contact us. We advise according to what the person actually needs to do.