German GmbH Managing Director Statutory Representation Mechanics
Managing directors possess absolute external authority under German law; internal expenditure limits create personal liability but cannot invalidate third-party contracts.
Section 15 Hgb
Meaning
Statutory provisions in the German Commercial Code govern the legal consequences of facts that should have been entered into the commercial register. This section 15 hgb establishes a system of public trust to protect business transactions from hidden corporate changes. It prevents companies from relying on unregistered facts against third parties who have no knowledge of them.
Omission Consequence
The first part of the rule protects those who rely on the absence of a registered fact. If a company fails to register the removal of a managing director, the firm remains bound by that individual’s actions under section 15 hgb. This creates a strong incentive for management to keep the register updated at all times.
Knowledge Shift
Knowledge regarding facts that were correctly entered and published falls under the second part of the rule. Once a change appears in the register, section 15 hgb allows the company to assume that everyone knows about it after a certain grace period. This transition moves the risk of ignorance from the company to the market participant.
After fifteen days of publication, the burden of knowledge rests firmly on the counterparty.
Security Benefit
Protecting the integrity of the public record supports the overall efficiency of the commercial environment.