Practical Guidance Using South Korea as a Case Study
Introduction
International M&A transactions present not only commercial opportunities but also formal legal challenges. One recurring issue is whether, and subject to which requirements, powers of attorney certified by foreign notaries will be accepted as sufficient by German notaries. Using South Korea as a case study, this article examines a practical question that recently arose in a transaction on which we advised. It outlines the applicable legal framework, the principal risks and practical recommendations for transaction teams.
Legal Framework for Recognising Foreign Powers of Attorney
Notarial Review Obligations
The German notary’s duty of review determines the practical approach and defines the requirements applicable to foreign powers of attorney. This review becomes particularly important where a party is represented at the notarisation rather than attending in person. Under section 17 of the German Notarisation Act (Beurkundungsgesetz – BeurkG), the notary's duty of review requires him to ensure that the original power of attorney, or an official copy thereof, is produced before him. The notary then reviews whether (i) representation is legally permissible, (ii) the power of attorney was validly granted in the required form, (iii) it remains in force, and (iv) its scope covers the contemplated transaction. If no power of attorney is produced, the notary must highlight the resulting uncertainty regarding the effectiveness of the representative’s actions. These review obligations also apply to legal entities incorporated under foreign law. In an M&A context, the power of attorney must therefore be structured to satisfy these requirements.
Common Gaps in Evidence of Authority
Uncertainty frequently arises where a power of attorney does not include an exemption from the prohibition of self-dealing under section 181 of the German Civil Code (Bürgerliches Gesetzbuch – BGB), or where complex group structures make an individual’s authority to represent a company difficult to establish. The position is often more challenging for foreign companies because there may be no corporate register comparable to the German commercial register.
Requirements for Recognition of Foreign Evidence of Authority
Formal Requirements and Authentication
Foreign certifications can be recognised for use in German legal transactions only if they meet certain formal and substantive requirements. Formally, the document must qualify as a public document under section 415 of the German Code of Civil Procedure (Zivilprozessordnung – ZPO). As foreign documents do not benefit from a statutory presumption of authenticity under section 437 ZPO, they will generally require an apostille or legalisation. Where a document consists of several parts, each part that constitutes a public document must carry evidence of authenticity. Once authenticity has been established, the general evidentiary principle applies that foreign public documents are presumed to have been executed in the form prescribed by local law and before a duly authorised official.
Translation Requirements
Although foreign-language evidence of authority is not inherently inadmissible when submitted to the German commercial register, registry courts increasingly request certified translations. The competent registry court will decide whether a translation is required in each individual case.
Substantive Equivalence
At a substantive level, the foreign certification must be equivalent to a German notarial certification. Equivalence exists where the foreign certifying official, by virtue of their training and official status, performs a function comparable to that of a German notary and follows a procedure consistent with the fundamental principles of German notarial law. Detailed knowledge of German corporate law is not, however, required.
Signature Certification and Personal Identification
For certifications of signatures only, the requirements are relatively limited when assessed against the purpose of the relevant German form requirement: provided the parties have complied with the procedure prescribed at the place of execution, the local form will generally suffice. Equivalence will not be established, however, where the signatory's identity has been verified merely by telephone or written enquiry, or by comparing handwriting samples. Such methods fail to satisfy the purpose of section 40(1) BeurkG, which requires personal identification of the signatory before the notary.
South Korea: Practical Case Study
South Korean Practice
Corporate Seals and Seal Certificates
Under Korean law, a corporate seal carries significance comparable to a handwritten signature. Its legal recognition is supported by a seal registration system and the use of a Seal Certificate, which, under Article 31(2) of the Korean Notary Public Act, serves as evidence that the document is “true and correct”.
Notarial Certification Through an Agent
A document may also be notarised through an authorised agent without the personal attendance of the company’s authorised corporate officers (Articles 30 et seq. of the Korean Notary Public Act).
Permitted Certification Methods
Article 57(1) of the Korean Notary Public Act provides two methods of certification: the party or its agent may affix the signature or seal in the notary’s presence, or may subsequently acknowledge an existing signature or seal before the notary.
Key Transaction Execution Risks
Applying the standard outlined in section B.II above, South Korean powers of attorney may present difficulties in German notarisation procedures for several reasons. First, the use of a corporate seal without a handwritten signature may be regarded as insufficient evidence of identity. Under German law, a signature performs important evidentiary and cautionary functions, while identity verification under section 40(1) BeurkG requires the signatory to appear personally before the certifying official. This issue is compounded by the fact that, unlike in Korean law, German law does not generally recognise a corporate seal as equivalent to a handwritten signature. Second, certification through an authorised agent, without the personal attendance of the relevant corporate officers, may be viewed as creating an overly indirect chain of authority and therefore as insufficiently reliable.
Recommendations for Transaction Teams
Obtain Early Confirmation from the German Notary
To reduce execution risk, the draft power of attorney should be submitted to the German notary in advance so that the notary can assess whether it meets the applicable recognition requirements. Acceptance will depend largely on the facts of the individual case and on the assessment of the notary handling the transaction.
Prepare Supporting Documentation
In practice, the notary may request a power of attorney bearing a handwritten signature or additional supporting evidence, such as a legal opinion confirming validity under Korean law, an apostille or a Seal Certificate. Where evidence of authority is in a foreign language, potential translation requirements should be addressed at an early stage.
Build Contingency into the Transaction Timetable
The parties should allow sufficient lead time in the transaction timetable to provide any additional evidence that the notary may require if the power of attorney is not accepted as initially submitted.
Conclusion
The use of foreign powers of attorney that do not conform to German expectations as to form creates significant practical challenges for advisers on cross-border M&A transactions. The South Korean example illustrates that a process regarded as customary and valid under local law may nevertheless raise concerns under German law and German notarial practice regarding evidentiary value and reliability. Forward planning is therefore critical to smooth transaction execution. Early coordination with the German notary, combined with careful preparation of the power-of-attorney documentation to meet German requirements, can prevent delays and materially reduce risks, including the risk of a failed closing.
Other author and key contacts: Maylin Heinrich, Associate
