This article examines how German group approval policies interact with the signing authority of managers in Iraqi subsidiaries. A group may require two internal approvals before a major contract is signed, while the Iraqi manager’s registered powers appear broader to suppliers and banks. When the manager signs without clearance, the effect of the contract on third parties and the manager’s internal responsibility are two separate questions.
The framework comes mainly from the Companies Law No. 21 of 1997, which governs the appointment and powers of managers and the role of the general assembly; the Iraqi Civil Code No. 40 of 1951, which sets the rules on agency, apparent authority and ratification; the Notary Law No. 33 of 1998, under which powers of attorney are typically executed before a notary public; and the Labour Law No. 37 of 2015 for internal disciplinary consequences. The Companies Registration Directorate at the Ministry of Trade maintains the official record of managers and corporate changes.
The legal source of local authority
Under the Companies Law, the manager of a limited liability company, or the board and managing director of a joint-stock company, derives authority from the articles of association and properly adopted shareholder or board resolutions. The registered appointment, any powers of attorney and the company’s constitutional documents should be reviewed together, and changes in management must be recorded with the Registrar to be relied on against third parties.
A group delegation chart is a useful internal tool, but it does not amend the subsidiary’s legal structure. Parent company officers also need a proper basis to act for the Iraqi company. Owning the subsidiary does not mean every executive in Germany can sign its contracts or operate its bank accounts.
Approval conditions versus signature mechanics
The group should decide whether dual approval is purely an internal control, a limitation on the manager’s authority recorded in the articles, or a condition communicated to the counterparty. These mechanisms have different legal effects. Whether a limitation can be relied on against a third party depends on how it is recorded and on what the counterparty knew or should have known.
An authority review should compare:
- The manager’s registered powers and any valid restrictions.
- Shareholder or board approvals required for the transaction.
- Powers of attorney and the specific acts they authorise.
- Bank mandates, guarantee powers and borrowing permissions.
- The approval process stated in the contract under negotiation.
A two-signature rule in an internal email does not change a bank mandate or invalidate an otherwise binding contract. Conversely, a broad signature block does not cure a transaction that legally requires additional approval.
Making transaction documents reflect the condition
Where a contract is subject to corporate approval, it should say so clearly and define when the condition is met. Negotiating authority should be distinguished from authority to sign. Letters of intent, purchase orders and settlement correspondence should use consistent language so that preliminary communications are not treated as a concluded commitment.
Powers of attorney should identify the authorised acts precisely. Under the Civil Code, certain acts, such as settlements, gifts, guarantees and disposals of property, generally require a specific rather than a general authorisation. Foreign-issued corporate documents usually need legalisation and certified Arabic translation before use in Iraq, which can take weeks and should be planned before signing deadlines are set.
When a manager exceeds instructions
If an unauthorised commitment has already been made, the signed documents and communications should be preserved. The analysis then turns on the manager’s legal powers, the counterparty’s knowledge and whether later conduct, such as performance or payment, could amount to ratification under the Civil Code. Simply telling the counterparty that group policy was breached may not release the subsidiary.
Internal consequences should be handled through proper corporate and employment processes, including any steps available under the Labour Law and the company’s own rules. Approvals must never be backdated, nor records rewritten to suggest authority existed earlier. If the company decides to adopt or renegotiate the transaction, that decision should be documented accurately by the competent body.
Managers’ personal liability
The Companies Law makes managers liable to the company, and in some cases to shareholders and third parties, for breaches of the law, the articles or their duties. Clear written limits, regular reporting and documented approvals protect the company and also the manager. Conversely, a group that routinely tolerates informal approvals may find it hard to argue later that a particular transaction was unauthorised.
Keeping the authority record current
Changes of manager, staff departures and revised financial limits should trigger updates to the registered records, powers of attorney and bank mandates, with notice to key counterparties. Revoked powers of attorney should be cancelled formally before the notary, not merely withdrawn internally.
Bank mandates and electronic approvals
Banking relationships are where authority problems most often surface. Iraqi banks will act on the mandate and signatory documents they hold, not on group policy, and changes require formal resolutions and updated specimen signatures. Groups introducing electronic approval workflows should ensure that the subsidiary’s bank mandate, online banking permissions and payment limits match those workflows. The Electronic Signature and Electronic Transactions Law No. 78 of 2012 recognises electronic signatures in many contexts, but banks and authorities may still require wet-ink or notarised documents for specific acts, so electronic approvals should be checked against the documents each counterparty actually accepts.
Conclusion & how Etihad Law Firm can help
Group controls only protect an Iraqi subsidiary if they are reflected in the documents that third parties rely on. As Iraq corporate legal counsel for German companies, Etihad Law Firm reviews articles, management appointments, powers of attorney and bank mandates, aligns them with group policies, and advises when authority disputes arise, so that internal controls operate through legally coherent signing arrangements.