Procuration is only authority to act for the company externally and says nothing about the holder’s remuneration or liability. Those are governed by the internal relationship, in Slovakia usually an employment contract or a mandate agreement, and without one both the entitlement to remuneration and the scope of duties remain uncertain. An employee is liable for damage under the Labour Code, which caps compensation in cases of negligence; a mandatary is liable under the Commercial Code rules on damages. In Czechia, the law expressly imposes on the procuration holder the care of a prudent manager.
The company has granted procuration to its sales director or to the successor in a family business, the Commercial Register entry is done and the holder is signing. No one, however, has recorded the remuneration for which he works for the company, the instructions he is to follow or what happens if he makes a mistake. Procuration does not address these questions, because it governs only what the holder may do towards business partners. The relationship between him and the company is a separate matter and must be arranged separately.
Procuration is authority; the internal relationship rests on a contract
Procuration authorises the holder to perform all acts arising in the operation of the business (Section 14(1) of the Commercial Code) and a restriction by internal instructions has no effect against third parties (Section 14(3)). Who pays the holder, how much and for what is not regulated by the law on procuration. In Slovakia the holder is usually either an employee of the company, typically a senior employee, or concludes a mandate agreement with it. Obligations between the procuration holder and the company in the exercise of his authority are governed by the Commercial Code regardless of whether the holder is an entrepreneur (Section 261(6)(a)). A mandate agreement is remunerated by operation of law (Section 566(1)) and where it does not state the amount, the mandatary is entitled to the customary remuneration (Section 571(1)). The power of attorney that a mandatary needs in order to act in the mandator’s name (Section 568(3)) is here supplied by the procuration itself.
The general meeting of an s.r.o. decides on the appointment and removal of a procuration holder unless the memorandum of association provides otherwise (Section 125(2)). Unlike the remuneration of managing directors, the law does not reserve the holder’s remuneration to the general meeting; the contract with the holder is therefore concluded on behalf of the company by the managing director, unless the general meeting reserves that decision to itself (Section 125(3)).
What the procuration holder is liable for
If the holder exceeds an internal limit or instruction, the contract with the business partner generally binds the company and the company may seek recovery from the holder. The Commercial Code contains no special liability regime for a procuration holder of the kind it provides for a managing director, so what matters is the contract under which he works for the company. A mandatary must proceed with due professional care and in accordance with the mandator’s instructions:
The mandatary must carry out the activity to which he has undertaken in accordance with the mandator’s instructions and consistently with the mandator’s interests which the mandatary knows or must know.
— Section 567(2) of the Commercial Code (unofficial English translation)
Breach of that duty gives rise to liability under the general rule on damages in contractual obligations (Section 373). Where the holder is an employee, he is liable for damage caused by a culpable breach of duties in the performance of work tasks (Section 179(1) of the Labour Code) and, in cases of negligence, compensation is capped at an amount equal to four times his average monthly earnings (Section 186(2)). When choosing between an employment contract and a mandate agreement, the extent to which the company will be able to recover from the holder should therefore also be weighed.
Czechia: the standard of care comes straight from the statute
Czech law leaves less to the contract. The Civil Code expressly provides that a procuration holder exercises procuration with the care of a prudent manager (Section 454 of Act No. 89/2012 Sb.), and that standard applies by operation of law, not merely by contract. The holder may also neither transfer procuration to another person nor grant a further one, and any agreement to the contrary is disregarded (Section 451). Even in a Czech company, however, remuneration, instructions and the rules on departure must be agreed in a contract; the law will not settle them for the parties.
What belongs in the contract with a procuration holder
The contract should set the remuneration and its components, internal limits and instructions including the acts the managing director reserves to himself, a duty to report larger transactions, confidentiality and the procedure on revocation of procuration. Revoking procuration does not of itself end an employment relationship or a mandate agreement, so the contract should say what happens to them. Internal limits belong in the contract even though they have no external effect, because it is precisely their breach that founds the holder’s liability towards the company. The external scope of procuration is discussed in what a procuration holder may sign and its termination in revoking procuration and signing afterwards.
We prepare the grant of procuration, the decision of the company body and the contract with the holder together through our granting procuration service, for Slovak and Czech companies alike. It is worth booking an initial consultation before registration, when terms with the holder are easiest to agree.
This answer provides general information on the law as at 12 September 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.
