Prokura and Prokurist: what a holder of Prokura may and may not do

What is Prokura?

Prokura comes from the Italian "procura", power of attorney. Unlike an ordinary power of attorney under the BGB (German Civil Code), its scope is laid down by law: Prokura authorises all kinds of transactions and legal acts that the operation of a commercial business entails (Sec. 49 (1) HGB). This means any commercial business, not just the company's own line of business.

The purpose is legal certainty. Anyone negotiating with a Prokurist does not have to check what they are allowed to do internally. A look at the commercial register shows that Prokura exists, and the statutory scope then applies towards every business partner (Sec. 50 (1) HGB). You can also find short definitions of Prokura, ppa. and commercial power of attorney in the formation glossary.

What is a Prokurist and what do they do?

The Prokurist is usually an employee in a special position of trust. They are not a body of the company like the managing director of a GmbH, but may represent the business externally almost as far. Typical tasks:

• negotiating and signing contracts with customers, suppliers and service providers,
• taking out loans and approving payments,
• hiring and dismissing employees,
• conducting legal proceedings for the business and instructing lawyers,
• standing in for the owner or management when they are absent.

If the Prokura is also not insignificant in the relationship with the employer, the Prokurist can be a senior executive to whom the Works Constitution Act (BetrVG) does not apply (Sec. 5 (3) sentence 2 no. 2 BetrVG).

What may a Prokurist do and what not?

Transaction	Prokurist without additional authority	Note
Conclude contracts with customers and suppliers	yes	Sec. 49 (1) HGB
Take out loans	yes	unlike the holder of commercial power of attorney (Sec. 54 (2) HGB)
Hire and dismiss employees	yes	Sec. 49 (1) HGB
Conduct legal proceedings	yes	"judicial transactions" (Sec. 49 (1) HGB)
Buy real estate	yes	Sec. 49 (2) HGB only covers sale and encumbrance
Sell real estate or encumber it with a land charge	no	only with special authority (Sec. 49 (2) HGB)
Grant Prokura themselves	no	only the owner or legal representative (Sec. 48 (1) HGB)
Transfer Prokura to someone else	no	Sec. 52 (2) HGB
Sign the annual financial statements	no	the merchant signs (Sec. 245 HGB)
Fundamental transactions: sell or close down the business, change the company name, admit shareholders	no	do not form part of the "operation" of a commercial business
File for insolvency for the business	no
Transactions with themselves	no, unless permitted	Sec. 181 BGB

Internal restrictions have no external effect. Example: the employment contract states that the Prokurist Jana may only conclude contracts up to €50,000 without consultation. She buys a machine for €80,000. The purchase contract still binds the business, because the restriction has no effect towards third parties (Sec. 50 (1) HGB). Internally, Jana has breached her duties and may be liable to the business for damages. The position can be different if the seller knew of the abuse or colluded with Jana.

Types of Prokura: sole, joint and branch Prokura

The HGB recognises three types. They differ in whether the Prokurist may act alone and for which part of the business.

Sole Prokura

The normal case: the Prokurist may act alone for the business. Unless otherwise specified, Prokura is sole Prokura (Einzelprokura).

Joint Prokura

Prokura can be granted to several persons jointly (Sec. 48 (2) HGB). They may then only act together, for example two Prokuristen jointly. This four-eyes principle must also be registered with the commercial register (Sec. 53 (1) sentence 2 HGB). It is also possible for a Prokurist to be allowed to act only together with a managing director, so-called improper or mixed joint Prokura.

Branch Prokura

Prokura can be restricted to one of several branches. This only has effect towards third parties if the branches are operated under different company names; a suffix identifying the company name as that of the branch is sufficient for this (Sec. 50 (3) HGB).

Prokura, commercial power of attorney, general power of attorney: the difference

Feature	Prokura	Commercial power of attorney (Handlungsvollmacht)	General power of attorney (Generalvollmacht)
Legal basis	Sec. 48 to 53 HGB	Sec. 54 HGB	Sec. 164 et seq. BGB, no special rule
Who grants it	merchant or their legal representative	merchant for their commercial business	any person and any business
Form	expressly (Sec. 48 (1) HGB)	no particular form, also by conduct	generally no particular form (Sec. 167 (2) BGB)
Scope	all transactions that any commercial business entails	transactions that such a commercial business or the permitted transactions usually entail	as specified in the power of attorney
Commercial register	registration mandatory (Sec. 53 HGB)	no entry	no entry
Can be restricted externally	no (Sec. 50 (1) HGB)	yes, if the third party knew or should have known of the restriction (Sec. 54 (3) HGB)	yes, through the content of the power of attorney
Signature	with a Prokura suffix, usually "ppa." (Sec. 51 HGB)	with a power of attorney suffix, usually "i.V.", no Prokura suffix (Sec. 57 HGB)	usually "i.V."
Selling or encumbering real estate	only with special authority (Sec. 49 (2) HGB)	only with special authority, as are loans, bills of exchange and legal proceedings (Sec. 54 (2) HGB)	depending on the power of attorney

The commercial power of attorney comes in three levels: for the entire business, for a certain type of transaction, such as purchasing, or for individual transactions (Sec. 54 (1) HGB). Anyone employed in a shop or open warehouse is deemed by law to be authorised to make the sales and receive the deliveries customary there (Sec. 56 HGB).

ppa, i.V., i.A.: signing correctly

The Prokurist signs by adding their name to the company name with a suffix indicating the Prokura (Sec. 51 HGB). The law does not prescribe a particular abbreviation; "ppa." for "per procura" is customary.

Suffix	Meaning	Who uses it	Example
ppa.	per procura, with Prokura	Prokuristen	Muster Maschinenbau GmbH, ppa. Jana Beispiel
i.V.	in Vertretung or in Vollmacht (on behalf of, by authority)	holders of commercial power of attorney and other authorised representatives (Sec. 57 HGB)	Muster Maschinenbau GmbH, i.V. Tim Probe
i.A.	im Auftrag (on the instructions of)	employees who pass on a declaration without their own power of representation	Muster Maschinenbau GmbH, i.A. Mia Test

What happens if the suffix is missing? If the circumstances show that the Prokurist is acting for the business, the declaration still takes effect for the business (Sec. 164 (1) sentence 2 BGB). According to a widely held view, Sec. 51 HGB is a procedural rule. If they sign in a way that looks like their own transaction, they may be bound themselves (Sec. 164 (2) BGB).

Who may grant Prokura?

Only the owner of a commercial business, i.e. a merchant, or their legal representative (Sec. 48 (1) HGB). What applies to merchants also applies to commercial companies (Sec. 6 (1) HGB).

Prokura can be granted by:

• the registered merchant (e.K.) themselves; how to become an e.K. is explained on our explainer page on the registered merchant, and we support the formation of the sole proprietorship for €259 net,
• the OHG and KG through their partners with power of representation; with us, form an OHG for €369 net and form a KG for €469 net,
• the GmbH and UG through the managing director (Sec. 35 (1) GmbHG); the GmbH is deemed a commercial company (Sec. 13 (3) GmbHG). With us, form a GmbH for €319 net and form a UG for €259 net,
• the stock corporation (AG) through the management board.

Prokura cannot be granted by businesses that do not carry on a commercial business: small traders without a commercial register entry, liberal professionals and the GbR (civil law partnership), including the registered GbR. The guide What is a GbR? explains what makes a GbR. A small trader who needs a representative can grant an ordinary power of attorney under the BGB. You can find a distinction between small business, e.K. and liberal professional on our explainer page "What is a sole proprietorship?".

All formation prices net plus VAT and third-party costs.

Granting Prokura: procedure, commercial register and costs

1. Decision: In a GmbH, the shareholders decide on the appointment of Prokuristen (Sec. 46 no. 7 GmbHG). This resolution concerns the internal relationship; if it is missing, Prokura granted by the managing director is still effective externally.
2. Grant: The owner or managing director expressly declares the Prokura (Sec. 48 (1) HGB), to the Prokurist or to the business partner (Sec. 167 (1) BGB). The law does not prescribe a particular form, but written form is easier to prove. Prokura does not arise tacitly or by mere toleration.
3. Application: The owner applies for the grant to be registered, and in the case of joint Prokura also this arrangement (Sec. 53 (1) HGB). The application is submitted electronically in publicly certified form, i.e. via a notary, by video communication if desired (Sec. 12 (1) HGB).
4. Entry: The register court enters the Prokurist and publishes this.

Item	Amount	Basis
Notary: drafting and certification of the application	approx. €127 incl. VAT	business value €30,000 (Sec. 105 (4) GNotKG, for a GmbH 1% of the share capital, at least €30,000): 0.5 fee €62.50 (no. 24102 KV), XML €25 (no. 22114 KV), expenses €17.50 (no. 32005 KV), documents approx. €2, together approx. €107 net plus 19% VAT
Register court: entry of the Prokura	€80	€60 (no. 4000 GV HRegGebV) plus one third retrieval fee €20 (no. 6000)
each further Prokura in the same application	€60 at the register	€45 (no. 4001) plus €15 (no. 6000)
Deletion of the Prokura	€80 at the register, plus notary	no. 4000 also covers deletion

According to our calculation, registering a Prokura therefore costs around €210. With several Prokuras in one application, the notary adds the values together (Sec. 86 (2), Sec. 35 (1) GNotKG), and for a GmbH with more than €3 million share capital, the business value is higher (Sec. 105 (4) no. 1 GNotKG).

Liability: is a Prokurist liable with their private assets?

Externally, as a rule no. If the Prokurist acts within their power of representation, their declarations take effect directly for and against the business (Sec. 164 (1) BGB). The contracting party is then the business, not the Prokurist.

They can be personally liable in these cases:

• Without power of representation: If, for example, they sell a piece of real estate without special authority and the business does not ratify the contract, they are liable to the contracting party for performance or damages (Sec. 179 (1) BGB).
• Towards the employer: If they exceed internal limits or culpably cause damage, they may be liable to the business. As an employee, they benefit from the principles of employee liability.
• Taxes: Anyone acting as a person with power of disposal has the tax obligations of a legal representative insofar as they can fulfil them (Sec. 35 AO), and can be liable for intentional or grossly negligent breaches of duty (Sec. 69 AO).
• Torts such as fraud to the detriment of third parties.

No duty to file for insolvency: The duty to file for insolvency lies with the members of the representative body, for example the managing director (Sec. 15a (1) InsO), not with the Prokurist. The guide Delayed insolvency filing explains what managing directors face.

When does Prokura expire?

• Revocation: Prokura can be revoked at any time, regardless of the employment contract; the entitlement to the contractual remuneration remains (Sec. 52 (1) HGB).
• End of the employment relationship: The power of attorney ends together with the underlying legal relationship (Sec. 168 sentence 1 BGB).
• Death of the Prokurist: Prokura is not transferable (Sec. 52 (2) HGB) and ends on their death.
• Insolvency: When insolvency proceedings are opened over the business, a power of attorney relating to the insolvency estate expires (Sec. 117 (1) InsO).
• Sale or closure of the business: If the owner changes or the business is closed down, Prokura as a rule ends.
• Not on the death of the owner: If the merchant dies, the Prokura remains in place (Sec. 52 (3) HGB).

Like the grant, the expiry must be registered with the commercial register (Sec. 53 (2) HGB). As long as it has not been entered and published, the business cannot rely on it against a third party who knew nothing about it (Sec. 15 (1) HGB). A dismissed Prokurist can therefore still bind the business during this time. So register the deletion immediately.

Becoming a Prokurist: requirements and salary

There is no training or examination for becoming a Prokurist. Prokura is given to someone the owner or management trusts enough to represent the business externally almost without restriction. These are usually experienced managers from sales, finance or purchasing. Only a natural person can become a Prokurist, and not the owner themselves.

There is no fixed Prokurist salary. Remuneration depends on position, sector, company size and region and is agreed in the employment contract. Prokura is a right of representation, not a salary component; it can be revoked without the remuneration changing (Sec. 52 (1) HGB).