Whether you are an entrepreneur or not, the topic of contingency planning affects us all. What happens if we are unable to act ourselves—if we cannot work due to a sudden illness, or if an accident forces us into a long hospital stay and we are unresponsive?
Family members or parents are not automatically entitled to make full or permanent decisions or take action on behalf of adults in the event of an emergency or incapacity. The same applies to spouses and registered civil partners.
What can have far-reaching consequences in the private sphere can cause serious problems for a company. If an entrepreneur is incapacitated and can no longer fulfill certain roles, someone else must step in. As soon as it concerns a person's private autonomous powers—meaning we are not thinking within organizational structures—this is only possible if there is an authorized representative.
Legally binding representation by an authorized agent
An authorized agent represents a person in a legally binding manner. Therefore, sole proprietors, general partners, limited partners, shareholders, etc., need an authorized person if they want their rights to be exercised and their duties to be fulfilled in the event of their unavailability.
The right power of attorney not only determines who should represent you, but also how that person should act. It is possible to provide an agent with a framework for action or specific instructions at the time the power of attorney is granted. This ensures that the principal's wishes are carried out when the power of attorney is exercised.
Powers of attorney are adjusted when framework conditions change
This highlights why we do not just speak of a standard power of attorney or a business power of attorney. We address contingency management because the respective frameworks and instructions for the agent change over time. It is part of an entrepreneur's risk management to adjust the power of attorney when the framework conditions in their company change. This applies to all roles a person holds. If the implementation of a growth strategy involving significant investment was the priority a few years ago, the objective today might be consolidation, involving a reduction in investment volume. If the agent does not have clear information about the principal's objectives, it will not be possible to exercise the power of attorney according to the entrepreneur's wishes.
Especially with complex corporate structures, coordinating all legal frameworks is essential. Unfortunately, we repeatedly see cases where, for example, a majority shareholder of a GmbH has appointed an agent, but the company's articles of association exclude the representation of a shareholder at the shareholders' meeting.
THE MAK'ED TEAM advises medium-sized entrepreneurs on issues of contingency management. Together with our partner, Jura Direkt GmbH based in Nuremberg, we create legally secure powers of attorney. THE MAK'ED TEAM designs the basis for these powers of attorney with entrepreneurs and their families, incorporating the specific situation within the company or corporate group. This allows entrepreneurs to define how an agent should act in the event of their unavailability. This not only ensures that the principal's wishes are highly likely to be carried out, but also provides the family with a structure in which they can operate. This is a major advantage during emotionally challenging phases of life—for both the family and the company.
Further information on the topic of contingency and emergency management can be found here.
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