Investment approach
Power of Attorney for an SL and a Project: Scope and Risks
A power of attorney lets someone act for you or for the SL. A general one covers only management; sale and mortgage need express wording, and the notary checks its scope against the deal.
A notarial power of attorney (poder) lets another person sign on behalf of you or your SL (sociedad limitada, limited company). Under the Código Civil a general power covers only acts of management, and a sale, mortgage or settlement needs express wording in the text (art. 1713). The wider the text, the wider the risk, so the scope, any monetary limits and the term are written down explicitly, not left "on trust".
How a power of attorney differs from the post of administrator
The administrador of an SL is appointed under the rules of the Ley de Sociedades de Capital and represents the company by virtue of that post. The apoderado (the person holding the power of attorney) acts within the text signed by the principal. If you want a project manager to sign contracts with contractors while you remain administrator, you need a power of attorney. If you want to hand over management, the question is the appointment of an administrator, which is a different procedure.
For an SL, general powers of attorney and delegations of authority must be entered in the Registro Mercantil (commercial register) (art. 94 of the Reglamento del Registro Mercantil). A power for a specific act does not have to be registered.
What scopes exist
| Type | What it covers | What it suits | Main risk |
|---|---|---|---|
| General (poder general) | Acts of management: contracts, payments, accounts | Ongoing management of an SL or a project | Powers that are too broad stay in force for years |
| Special | One act: signing a specific escritura (public deed) | A one-off deal, signing abroad | Narrow wording will not cover a related transaction |
| With limits | General or special, with a ceiling on the amount or two signatures | Payments to contractors, the budget | The remaining limit has to be tracked |
| Joint (mancomunado) | Two people act together | Large transactions | Blocked if one is unavailable |
A sale, mortgage, settlement and other acts of disposal require express wording in the text: art. 1713 of the Código Civil. A power can expressly cover buying, signing arras (deposit contracts), opening accounts, obtaining licences, a contract with a contractor and other actions: the list is better written item by item.
Worked example: a limit and a second signature
Worked example, not a forecast. A power of attorney for a project manager: payments up to €30,000 he signs alone, above €30,000 a second signature is needed. The renovation budget is €120,000, with a contract with the contractor for the whole sum: 120,000 > 30,000, so a second signature is needed. Three payments of €40,000 also require two signatures, because each exceeds €30,000. A payment of €25,000 the manager makes alone.
If the limit is written differently (a total per month rather than per payment), the calculation changes. That is why the wording of the limit is agreed before signing, not at the first payment.
What the notary checks
When a deed is signed under a power of attorney, the notary, under art. 98 of Ley 24/2001, records details of the document in the text and states a judgment on whether the authority is sufficient for this transaction. The registrar checks that such a judgment is present and matches the content of the document. If the scope of the power is narrower than the deal, the deed will not be signed.
A power signed abroad needs legalisation and a sworn translation: requirements. For a power of attorney for a purchase, see the articles on poder notarial for buying and what is better done in person.
What risks to allow for
- Exceeding authority. What the representative did beyond the mandate does not bind the principal unless the principal approves it (art. 1727 of the Código Civil). But the money may already have been spent by then.
- Conflict of interest. An agent instructed to sell or manage a property is forbidden to buy it himself (art. 1459 of the Código Civil). For a project where the manager and the contractor are the same person, this must be addressed separately.
- Term. A power of attorney without a term stays in force until revoked. Revoking a general power that was entered in the register must also be entered.
- Death and support measures. The mandate ends with the death or insolvency of the principal or the representative, and also when a curatela representativa (court-appointed representation) is set up for the principal (art. 1732 of the Código Civil). The exception is a preventive power of attorney (mandato preventivo), which is designed for the case where the principal will need support. It is a separate text, drawn up with an abogado (lawyer).
If you give a power of attorney to a project operator, the same rules apply: purposes, limits, term, reporting. For DNPI projects the terms are fixed by the contract for the specific project, and the power of attorney must not go beyond them.
What questions to put to an abogado
- Whether a general power is needed, or special ones for each deal are enough.
- Which actions to exclude: sale, mortgage, loans, changing the administrator, taking out credit.
- The limit by amount and by number of signatures, the term and how it is revoked.
- How the representative reports: the link to the investor report and the shareholders' agreement.
This article does not replace a consultation. The choice of ownership form for a project and the administrator's role are covered in the piece on governance when buying through an SL. To work out a project budget, start with the calculator.
Questions and answers
Which power of attorney should I give to manage an SL?
If you need ongoing management, a general power with a list of actions and limits is usually drawn up. For a single deal a special one is enough. Which option fits is for an abogado to decide.
Does a power of attorney have to be entered in the Registro Mercantil?
General powers and delegations of authority of an SL must be registered (art. 94 RRM). For one-off acts no entry is needed.
Can the representative sell my property?
Only if the power of attorney says so expressly: a general power without such wording covers acts of management (art. 1713 of the Código Civil). The notary checks that the authority is sufficient at signing.
When does a power of attorney stop being valid?
On revocation, the representative's renunciation, the death or insolvency of one of the parties, and when support measures are set up, unless it is a preventive power of attorney (art. 1732 of the Código Civil).
