A lasting power of attorney is particularly important for entrepreneurs, because without one, a court-appointed guardianship with far-reaching consequences for the business may be imposed in an emergency. Learn which company-specific provisions you should put in place.
Power of Attorney for Entrepreneurs: Safeguarding Capacity to Act in an Emergency
Imagine suffering a severe accident or stroke tomorrow and being unable to make either business or personal decisions. Who then runs your company? Who signs contracts, approves tax returns, or makes staffing decisions? Many entrepreneurs assume that a spouse or family member will automatically step in. This is a dangerous misconception. Without a valid lasting power of attorney, the guardianship court will appoint a legal guardian -- and this person is not necessarily someone you trust. For entrepreneurs, the requirements for a lasting power of attorney are significantly more complex than for private individuals.
Why the Standard Power of Attorney Is Not Sufficient
Most lasting powers of attorney created using standard templates or through simple consultations cover personal matters: healthcare, determination of residence, asset management, dealings with authorities and insurers. For the personal sphere, this is generally adequate.
However, entrepreneurs face additional challenges:
- Shareholder rights: Who exercises your voting rights at the shareholders' meeting? Who votes on amendments to the articles of association, capital measures, or the appointment and removal of managing directors?
- Management authority: If you are the managing director yourself, who takes over the management or appoints a successor?
- Sale of the business: May the authorised representative sell or encumber company shares?
- Banking powers: Are the company-related bank accounts covered?
- Land registry requirements: Does the power of attorney meet the strict formal requirements of land registry law?
A purely private lasting power of attorney regularly fails to address these questions.
Company-Specific Provisions
Securing Shareholder Rights
If you are a shareholder in a GmbH, KG, or other partnership, you must verify whether the articles of association permit representation by an authorised representative. Many articles of association contain restrictions whereby voting rights may only be exercised in person or by fellow shareholders. In such cases, a lasting power of attorney alone is not sufficient. The articles of association must be amended accordingly.
Provisions that you should include in the lasting power of attorney or, additionally, in the articles of association:
- Exercise of voting rights at shareholders' meetings
- Approval of shareholder resolutions, particularly amendments to the articles of association and capital measures
- Information and inspection rights under the articles of association or by law
- Disposal of company shares, including assignment and encumbrance
Management Authority
If you are the managing director or managing partner yourself, provisions must be made for how management will continue in the event of your incapacity. The lasting power of attorney should authorise the representative to:
- Appoint a new or deputy managing director
- Continue ongoing business operations or organise an orderly transition
- Take employment law measures, such as hiring or dismissals
- Enter into contractual obligations or amend existing contracts
Commercial Power of Attorney (Prokura) as a Supplement
The commercial power of attorney (Prokura) under § 48 HGB can be a useful supplement to the lasting power of attorney. The holder of a Prokura is registered in the commercial register and can act for the company in business dealings without further proof. However, the Prokura does not cover all legal transactions. In particular, the sale and encumbrance of real property, the granting and revocation of Prokura, and the winding up of the business are not covered.
The lasting power of attorney and the Prokura serve different purposes: the Prokura relates to the company, while the lasting power of attorney relates to the entrepreneur as a person. Both instruments should be coordinated to avoid gaps or contradictions.
Notarisation: More Than a Recommendation
Why Notarisation Is Important
A lasting power of attorney can in principle be granted without any formal requirements, including orally. For entrepreneurs, however, notarisation is strongly recommended, for several reasons:
- Land registry eligibility: Only notarised or certified powers of attorney are accepted by the land registry. If you own real property, notarisation is indispensable.
- Evidentiary value: A notarial deed carries special evidentiary weight in legal transactions. Banks, authorities, and business partners generally accept notarised powers of attorney without further scrutiny.
- Identity verification and legal capacity: The notary verifies the identity of the grantor and satisfies themselves of the grantor's legal capacity at the time of notarisation. This protects against subsequent challenges.
- Duty to advise: The notary is legally obliged to explain the implications of the power of attorney. This ensures that you fully understand the consequences of your decision.
Bank-Specific Requirements
Many banks accept even notarised lasting powers of attorney only to a limited extent and additionally require their own account authorisation forms. It is therefore advisable, in parallel with creating the lasting power of attorney, to set up the bank-specific authorisations at the company's and personal house banks. Clarify in advance what documents the bank requires and whether registration of the power of attorney in the bank's internal system is necessary.
Advance Healthcare Directive and Living Will
The lasting power of attorney should always be supplemented by an advance directive on guardianship (Betreuungsverfügung) and a living will (Patientenverfügung).
Advance Directive on Guardianship
In the event that the lasting power of attorney is insufficient or invalid, you can specify in an advance directive on guardianship which person the guardianship court should appoint as guardian. You can also name persons whom you expressly do not wish to serve as guardian. In addition, you can express preferences regarding the manner of guardianship.
Living Will
In a living will, you specify which medical measures should be carried out or omitted in certain situations. This concerns in particular questions of intensive care, artificial nutrition, and pain management. Align the living will and lasting power of attorney in terms of content. The authorised representative must be familiar with your living will and be able to enforce its implementation with the treating physicians.
The Supervisory Representative
For comprehensive powers of attorney, the appointment of a supervisory representative (Kontrollbevollmächtigter) is recommended. This person is tasked with monitoring the activities of the primary representative and intervening in the event of breaches of duty. The supervisory representative may, for example:
- Assert rights to information and accountability against the primary representative
- Revoke the power of attorney in the event of abuse
- Appoint a substitute representative
Particularly for entrepreneurial powers of attorney involving substantial assets, the supervisory representative is an important safeguarding mechanism.
Regular Review
A lasting power of attorney is not a document to be filed away and forgotten. It should be regularly reviewed and adjusted as needed. Typical occasions for review include:
- Changes in the corporate structure (new companies, conversions, acquisitions)
- Changes in personal circumstances (divorce, new partnership, death of the representative)
- Changes in the legal framework (new statutory requirements, changes in corporate law)
- Regular intervals of two to three years, even without a specific occasion
Mark the review date in your calendar and treat it with the same priority as your annual tax planning.
Practical Structuring Tips
- Separate private and business powers of attorney: Consider issuing separate powers of attorney for the private and business spheres, potentially to different persons.
- Name substitute representatives: If the primary representative is unavailable, a substitute must be ready.
- Inform the representative: The best power of attorney is useless if the representative does not know where it is kept and what tasks await them.
- Register the power of attorney: Have the lasting power of attorney registered with the Central Register of Lasting Powers of Attorney (Zentrales Vorsorgeregister) of the Federal Chamber of Notaries. This allows the guardianship court to quickly establish that a power of attorney exists in an emergency.
- Provide an instruction document: Prepare an accompanying document with the most important information: account numbers, insurance policies, contacts, current contracts, access credentials.
Conclusion
For entrepreneurs, the lasting power of attorney is one of the most important precautionary measures of all. Without it, you risk having a court-appointed guardian decide over your business and personal assets in an emergency. Company-specific drafting, coordination with the articles of association, and notarisation are indispensable.
At compleneo, we combine notarial expertise with business understanding. We provide comprehensive advice on lasting powers of attorney, advance directives on guardianship, and living wills, ensuring that your arrangements seamlessly cover both the private and the business spheres.
