Powers of attorney for cancellations: What companies need to know

If the managing director is not available and a termination has to be given, this can be a problem without proper preparation. A missing or wrongly issued power of attorney makes the termination ineffective. That costs time and money.

Why powers of attorney are important in companies

In a GmbH, in principle, only the managing director is entitled to terminate. If there are several managing directors with overall representation, they must all sign together. In everyday working life, this is often impracticable. The solution: clearly defined powers of attorney.

The three most important types of power of attorney

1. General power of attorney

It enables comprehensive representation in all areas of business, including terminations. Useful for longer absences or permanent representation arrangements.

2. Special power of attorney

It only applies to a specific individual case, for example when a specific employee is dismissed. Once completed, it expires automatically.

3. Type of power of attorney

It entitles you to certain recurring transactions on a permanent basis. HR managers often receive such a power of attorney for all dismissals in the company.

The critical point: Terminations by proxy

Special rules apply to cancellations. An error may make the entire termination ineffective.

The central provision: Section 174 BGB

The law protects employees from unjustified dismissals. You can refuse a termination if a proxy certificate is not presented.

Procedure for cancellations:

• The employee receives a dismissal from an authorized representative
• If no original proxy certificate is presented, the employee can reject the termination
• The rejection must be made immediately and therefore regularly within one week
• Consequence: The termination is ineffective and cannot be cured retroactively even upon presentation of the document but must then be made up for
• Special feature in the case of extraordinary terminations: If the two-week period in accordance with Section 626 (2) BGB has elapsed in the event of rejection, no further extraordinary termination can be given due to the same reason for termination, all that remains is ordinary termination.

Three important practical tips

1. Give power of attorney correctly

The power of attorney itself does not need to be in writing. Nevertheless, you should always draw up a written power of attorney, because without it there is a risk of rejection in accordance with §174 BGB.

2. Proceed correctly when canceling

• The original power of attorney must be presented upon termination
• A copy or fax is not enough
• Document the submission of the power of attorney
• Give a copy to the employee

3. Know and use exceptions

A proxy certificate is not required if:

• The personnel manager gives notice of dismissal (is typically considered an authority to dismiss according to settled case law)
• An authorized signatory entered in the commercial register signs (be careful with a general authorized signatory: The individual power of representation does not arise from the commercial register entry, so a separate notice is necessary)
• The employees were informed in advance of the right of termination

Common mistake in practice

Many companies assume that the role of HR manager is generally known. However, that is not enough.

Active information is required:

• Notice with the name and function of the authorized person
• Information on the intranet
• Notification of new hires

Employees must know which specific person is authorized to dismiss. The mere function name is not enough.

Checklist for your company

✓ Issue powers of attorney in good time before required

✓ Create written power of attorney certificates and store them securely

✓ Make authorized persons known internally

✓ Have original documents ready

✓ Observe the one-week rejection period

conclusion

An ineffective termination causes significant costs: payback payments, legal costs and extended notice periods. With a well-thought-out proxy strategy, you can avoid these risks.

The most important measures:

• Give clear powers
• Communicate transparently
• Keep documents handy

Paxa helps you find your way around and implement the right strategy for your company. contact us here

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