CONCEPT OF PROCURATION AND THE POSSIBILITY OF ITS CONFERRING BY A NATURAL PERSON - ENTREPRENEUR

#48Concept of procuration and the possibility of its conferring by a natural person - entrepreneur

Act No. 513/1991 Coll., the Commercial Code, as amended ("Commercial Code") defines the scope of the legal institute of procuration in Section 14. Procuration may be defined as a commercial law institute, which represents a special type of contractual representation.

In business practice, it is the most common type of representation of an entrepreneur, through which the entrepreneur authorizes the proxy to perform all legal acts that occur in relation to the operation of the business (e.g. for concluding commercial contracts), even if a special power of attorney is otherwise required for such acts.

The limitation of the procuration stems directly from the statutory law from Section 14 par. 2 of the Commercial Code, in relation to the power to transfer and encumber real estate. However, should the power of attorney expressly state so, procuration may also be extended to stated acts.

Pursuant to Section 14 par. 3 of the Commercial Code, "Limitation of the proxy by internal instructions shall not have legal consequences with respect to third parties", which means that if the entrepreneur limits the proxy by his internal regulations and instructions (e.g. directly prohibits the performance of acts related to the conclusion of specific contracts), this does not affect the legal acts performed by the proxy towards third parties.

A procuration may be conferred to a natural person with full legal capacity, the Commercial Code does not impose any other condition. Pursuant to Section 14 par. 6 of the Commercial Code, a proxy may also be conferred to several natural persons (collective procuration), but the scope of their activities and the manner of their actions must be precisely defined by the entrepreneur.

Although the Commercial Code does not states so expressively, conferring of a procuration has to be in written form. This follows from the principle of publicity whereby the conferring of a proxy is recorded in the Business Register (“Business Register"). Pursuant to Section 14 par. 6, first sentence of the Commercial Code, "The conferring of a procuration is effective since its entry in Business Register", where the entry is important for the actual creation of the proxy and is of a constitutive nature, i.e. proxy is entitled to act for the entrepreneur only from this moment onwards.

According to Section 2 of the Commercial Code, an entrepreneur is considered to be:

1. a person registered in the Business Register,
2. a person carrying on business on the basis of a trade license (“natural person - entrepreneur"), 
3. a person who carries on business on the basis of a license other than a trade license pursuant to special regulations,
4. a natural person who carries out agricultural production and is entered in the register pursuant to a special regulation.

In the previous version of the Commercial Code, the natural person - entrepreneur had the option to be registered in the Business Register at his or her own request and to confer a procuration. After the amendment of the Commercial Code in 2020, a transitional provision in Section 768s par. 2 lit. a of the Commercial Code came into effect, which requires the courts of Business Register, in cooperation with the Ministry of Justice of the Slovak Republic, to erase natural persons – entrepreneurs from Business Register if they are also registered in the Trade Register.

In relation to possibility to confer a procuration, an interesting situation occurs which may be in contrast with the principle of publicity. Statutory law clearly and expressly states in Section 14 of the Commercial Code that the condition for the establishment of legally relevant effects of a procuration is its registration in Business Register. Based on the aforementioned, the person conferring a procuration has to be registered in Business Register. Therefore, it seems that natural person - entrepreneur as an entity that can no longer be registered in Business Register, is basically not given an opportunity to meet this legal condition and should not be able to confer a procuration.