Joint representation by a statutory body member (executive) and a proxy

While setting the manner of representation a company, clients often require that the four-eyes principle should apply; it means that the company is always represented by e.g. at least two executives. (Not only) if a company has only one statutory body member (e.g. one executive), a possibility of inclusion of both an executive (a statutory body member) and a proxy being able to represent a company in the Articles of Association and a subsequent entry of the fact in the Commercial Register is often considered. Such strategy is common in Germany and Austria and is explicitly permitted by the national legislation.

In connection with the new Czech Civil Code and amendments regarding legal persons, a debate about the above practice being applied in the Czech Republic has been sparked since the Commercial Code did not allow to adopt such a type of arrangement.

A decisive answer has been recently given by the Czech Supreme Court in its ruling File No. 29 Cdo 387/2016; it states that the possibility of signing by both a statutory body member and a proxy is to be seen as an unacceptable representation of a business corporation and may not be entered into the Commercial Register for the authorization of an executive and a proxy differ fundamentally. While the executive has full legal powers to represent a corporation as its statutory representative, the proxy has (even if wide) authorization to do so on a basis of a special type of power of attorney.

The above manner of representing a business is in direct disagreement with both the law and public order; therefore, should a company include these provisions into the Articles of Association, it would be deemed null and void and legislation concerning legal persons would apply (it would also be the case even for companies which have, owing to a procedural error on the part of registration courts, already followed the practice after entering it to the Commercial Register).