Page 53 - Albanian law on entrepreuners and companies - text with with commentary

The loss of third party protection in case the party knew or, due the circumstances,
should have known about a defect of representation is the limit of the generalized third party
protection principle preventing a fraudulent third party from relying on his wrongdoing.
Another example of this kind is Article 64 (2) of the Company Law: A limited partner who
has concluded an agreement with a third party in the capacity of an authorized agent without
indicating that he is acting in this authority, shall be liable for this transaction like a general
partner, unless the partnership can prove that the third party knew of the absence of authority
or could not have been unaware of it.
It is important to note that paragraph (2) of Art. 12 applies this loss of third party
protection also against the wording of Art. 9 (2) of the First Directive. The latter declares that
the company may never rely on limits of representation towards third parties even if they were
published. That means the company would be bound even if a third party positively knew
about these restrictions or incited the representative to abuse his authorization. It is hardly
imaginable that the authors of the First Directive would have accepted such a result. The
purpose of the Directive is not to protect third parties who are not in good faith. Therefore, the
national legislation may well require that in case of an evident abuse the company will not be
bound. However, it is not enough for this ‘evidence’ to prove that the limitation on
representation had been published: The company must prove that there was actual knowledge
held by the third party. In this sense, paragraph (2) of Article 12 aligns the definition of
‘evidence’ with the one the Directive applies in Article 9 (1) to the representative who is
acting outside the company objects. The solution of paragraph (2) of Article 12 is therefore in
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line with the First Directive.

3. The second part of the first sentence of paragraph (3) of Article 12 reflects the second
half of the first paragraph of Article 9 of the First Directive. Both provisions declare that the
principle of unlimited representation does not apply in case the acts of the representative
“exceed the powers that the general law confers or allows to be conferred on them”. That
means that the organ who represents the company, say the Managing Director of a JSC, may
not interfere with the competency of another organ, say the Supervisory Board. In case this
legal competency is breached, third parties’ interest is not protected; and as the legal
competency structure provided by the new Company Law is generally not a matter which the
same organs may change, any ex-post authorization would only be possible if the law
explicitly allowed it.
The ECJ extended this principle of Article 9 (1) and established that even third parties
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with good faith may be affected if an external rule disables a decision-making organ. The
case in question regarded rules of conflicts of interest which are now provided by Article 13
of the new Company Law. Article 13 (2) and (3) require the approval of the other partners,
members or by other company organs. Despite accepting that the purpose of the First

85 This solution corresponds to the German doctrine of ‘abuse of authorization’; G. Wegner “Officers’ and Directors’
Liability Under German Law- A Potemkin Village” (2015) 16 (1) Theoretical Inquiries in Law.
86 Case 104/96, Cooperative Rabobank.
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