Entrepreneurial power of attorney

Decision-makers in a company are often not sufficiently aware of a situation: if they are unexpectedly unable to work due to a serious illness (heart attack, stroke, etc.), an accident (coma, etc.) or death, this can render a company incapable of acting – with corresponding economic consequences.

A business power of attorney is essential for precisely this case. Only with a business power of attorney can a company remain able to act, even if, for example, managing directors are temporarily or long-term unable to run the company’s business due to health reasons.

It is therefore important to keep an eye on the possible absence of decision-makers as part of responsible business / company management and to take appropriate precautions: a modern business power of attorney can provide a remedy here.

Why is a business power of attorney important?

The establishment of a business power of attorney is important to ensure the ability of a company or business to act if, for example, the managing director is no longer able to manage the business. If a decision-maker dies, the business power of attorney can bridge the limbo between death and clarification of the succession.

Because the loss of the managing director can lead to the fact that, at an operational level,

• no more contracts are concluded or
• no more payments such as rent, salaries, etc. are made

In extreme cases, this can lead to payment difficulties and thus to the threat of insolvency (bankruptcy!) or the loss of employees.

But such a failure can also have enormous consequences at the corporate law level: For example, the failure can lead to shareholders no longer being able to pass resolutions (for example, the appointment of a new managing director).

Power of attorney: especially important for sole proprietors

It is of fundamental importance to establish a power of attorney for the company, particularly for sole proprietorships, one-man GmbHs and one-man GmbH & Co. KGs. If the owner is unable to act – i.e. is no longer able to act – the entire company is no longer able to act. At the same time, legal obligations (contracts, taxes, etc.) continue. In this situation in particular, it is essential to find a remedy with a power of attorney for the company.

What happens if no precautions have been taken?

If no provisions have been made, the guardianship court will appoint a guardian for the entrepreneur’s required areas of responsibility, or in exceptional cases the registry court will appoint an emergency manager upon request.

The guardianship court decides who will be the guardian at its own discretion. Usually a person from the family is appointed as the guardian or – if no one wants to take on the care – a professional guardian.

If there is no entrepreneurial power of attorney, but a care directive (see also precautionary measures declarations), this means that a person of choice is appointed as the guardian. In most cases, however, the person appointed is someone who was chosen primarily to take on private matters and is not necessarily suitable for taking on the company’s matters.

What are the disadvantages of appointing a guardian through the guardianship court?

The problem with the court appointment of a guardian is the loss of time through the process. Time passes that a company – especially in a crisis – does not have. Any disputes between those involved can lead to an additional delay in the guardianship process.

In addition, the question arises as to whether the court-appointed guardian is even able to make decisions (at short notice) because he or she must first familiarize himself with the company’s issues. Unfortunately, guardians often do not have the necessary skills (e.g. craftsmanship) or specialist / technical / industry knowledge to run a company. If relatives are appointed as guardians, the situation can be made more difficult by the fact that they are personally burdened by the absence of the relative. Last but not least, a court-appointed guardian is in many cases dependent on the approval of the guardianship court and is accountable to the court.

The court appointment of a guardian for an entrepreneur is therefore the case that should be prevented at all costs by creating a business power of attorney.

Why is a private power of attorney usually not sufficient?

In principle, a private power of attorney can also be sufficient to ensure that the business continues. However, the already discussed lack of specialist knowledge of the authorized person and the special stress situation of the authorized person must also be taken into account. This can be the case, for example, if the spouse has a power of attorney but was previously only involved in private matters and not in the business. Against this background, the person concerned would often not want to burden the private power of attorney with business matters.

How do you get the optimal business power of attorney?

In order to create a business power of attorney or powers of attorney that will work in an emergency, you should run through the usual business operations, taking into account the loss of individual participants. It is then necessary to determine who should and must be able to do what in which situation. For example, it is important to check whether several people are authorized to sign and – at least in the short term – can have access to important accounts.

Companies should in particular check the provisions in the articles of association regarding management, representation of the company and decision-making: is the ability to act preserved even if individual (co-)shareholders are unavailable?

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