In mid-January, the Czech Supreme Court published a decision which the professional community has known about since mid-December last year. In a move to harmonise decision-making, the Supreme Court unified the wavering opinions to date on the requirements for powers of attorney covering legal acts which themselves should take the form of a notarial deed.
Under Art. 441 sec. 2 of the Civil Code (the “CC”), a power of attorney granted to perform legal acts for which the law lays out a special form must also take that form. Generally, if a power of attorney is granted to perform legal acts which by law require the form of a notarial deed, then the power of attorney should also take the form of a notarial deed. Even so, the view that the absence of that form would, per se, invalidate the power of attorney - or even lead to the invalidity of a legal act performed by the proxy for the principal on its basis - is wrong.
According to the new understanding of invalidity under the Civil Code, a legal act which does not conform with the law is only invalid if this is required by the intent and purpose of the law. In other words, if the act is not performed in the manner prescribed by law, it will only be invalid if the intent and purpose of the statute so require. In cases where the form of a notarial deed is specified for legal acts, the intent and purpose of Art. 444 sec. 2 of the CC (on the form of powers of attorney) is to verify the identity of the principal and also ensure that the power of attorney is granted for the specified act.
In its decision, the Supreme Court concluded that interpretations of Art. 441 sec. 2 of the CC which require the form of a notarial deed for powers of attorney are incorrect, and that based on the intent and purpose of the law, a written instrument with an officially verified signature would suffice. This applies even in situations where a power of attorney was granted to perform legal acts which must by law take the form of a notarial deed.
Interpretation of Art. 6 sec. 1 of the Act on Business Corporations
The Supreme Court also considered the relationship between Art. 441 sec. 2 of the CC and Art. 6 para. 1 of the Act on Business Corporations (the “ABC”) and concluded that the ABC provision is a special regulation which takes priority over the general provision. At the same time, a power of attorney granted for the founding of a business corporation is understood as a legal act which comes under establishment of a business corporation and is thus covered by Art. 6 sec. 1 of the ABC. For this reason, it will suffice if the power of attorney on the adoption of the company’s foundation deed is in written form bearing the officially verified signature of the principal (founder). This is the case even if the foundation document must be prepared in the form of a notarial deed on that act.