Limited-liability company - liability in damages of a member of the management board

Polish Commercial Companies Code in art. 299 provides a special kind of responsibility of the members of the management board for obligations of a limited-liability company. This liability is unlimited and personal, which means that the creditor can reach the personal assets of a board member to achieve complete satisfaction.

Liability in damages of the members of management board is formed when the execution of the company's assets proves to be ineffective. This fact can be demonstrated by the creditor on the basis of any evidence which shows that the company has no assets to pay off its debts. It is irrelevant that a manager is also a partner of the company. This fact does not exempts him from the responsibility referred to art. 299 Code of Commercial Companies. However this kind of liability lies only on those members of the management board, for the tenure of which, there were reasons for filing a motion for bankruptcy, and who have not submitted it.

Despite the ineffectiveness of enforcement against the company, a member of the management board may be released from liability if he proves that:

• bankruptcy petition of the company (involving either liquidation or reorganization) was filed by the proper time (It has been held that it is irrelevant whether the bankruptcy petition was filed by the management board member who is the defendant in the action seeking damages or by another entity entitled to file a bankruptcy petition (Supreme Court judgment of 9 May 2008, Case No. III CSK 364/07, LexPolonica No. 2143632). According to the polish law expression “timely” should be understood as two weeks from the date on which the company became insolvent (stop performing its due obligations or liabilities of the company exceeded the value of its assets, even if the obligation are performed on a regular basis). In practice, in judicial proceedings the date of such request shall be indicated by an established expert;
• bankruptcy petition of the company was not filed by the proper time without his fault. No fault of the member of the management board may be related with different circumstances, but it is important to prove that he was acting with due diligence and he had no way of determining the existence of grounds for bankruptcy;
• despite not filing the bankruptcy petition of the company the creditor has not suffered any damage, eg. when a board member can prove that the creditor’s claim would not be satisfied even if he had filed the bankruptcy petition of the company in the proper time;

So if a member of the management board proves at least one of the above circumstances, in result he will not bear personal liability in damages in relation to the creditors.

Also please keep in the mind that failure to timely notify by a member of the management board of the petition in bankruptcy of the company is punishable by a fine, the penalty of restriction of liberty or imprisonment up to one year (art. 586 Commercial Companies Code).

2015.02.23