Meaning
Statutory regulations in German corporate law govern the external representation of a limited liability company by its managing directors. This specific legal framework, established by gmbh act section 35, dictates how directors must act to legally bind the company in contracts and transactions with third parties. It establishes the default rule of joint representation to protect the company from unauthorized actions by a single director.
Representative Authority
Third parties must verify the representation structure of a company to ensure that contracts signed by its officers are legally binding. Under gmbh act section 35, managing directors hold the power to represent the company in judicial and extrajudicial matters. This power is unlimited and cannot be restricted with binding effect against third parties, even if the internal rules of the company are breached.
Joint Representation
The standard statutory model requires directors to act together unless the articles of association state otherwise. According to gmbh act section 35, if multiple directors are appointed, they are only authorized to represent the company jointly. This mechanism prevents a single director from committing the company to major liabilities without the knowledge and consent of their co-directors.
Corporate Security
Companies can grant sole representation rights or joint representation with an authorized officer to increase operational agility. While gmbh act section 35 sets joint representation as the default, the articles of association frequently modify this rule to grant sole representation to specific managing directors. This modification is registered in the commercial register, allowing business partners to trade with confidence.
If an unauthorized director signs a contract without the necessary co-signatures, the company is not bound by the agreement, placing the liability on the signing individual.
