A Management Board Member of a Limited Liability Company Risks Their Entire Personal Assets for the Company’s Debts – Even If They Are a Foreigner or Not Actively Involved in Its Operations
Preliminary Remarks
Legislative Purpose of the Provision Article 299 of the Polish Commercial Companies Code (KSH) establishes the liability of management board members for the debts of a limited liability company (LLC) when enforcement against the company proves ineffective. This regulation serves a key role in protecting creditors, preventing the siphoning off of company assets, and ensuring the accountability of those managing the company for its obligations.
Legal Nature of Liability
The legal nature of the liability under Article 299 KSH is a matter of doctrinal debate. The primary approaches identify it as either a guarantee-based or compensatory liability. According to the prevailing view, board members are liable not for damages but for the company’s obligations, suggesting that this liability has a statutory guarantee-based character. However, judicial rulings, including a 2008 Supreme Court resolution, have emphasized the compensatory nature of this liability, which has been reflected in numerous subsequent judgments.
Conditions for Liability A compensatory interpretation of Article 299 KSH requires fulfilling conditions such as the existence of damage, causation, and an unlawful failure to file for bankruptcy. In practice, the ineffectiveness of enforcement against the company presumes damage equivalent to the unpaid claim.
Scope of Subject-Matter Liability
Scope of Obligations Board members’ liability encompasses all the company’s obligations, whether civil or public, unless other provisions exclude its application. An example of such exclusion is Article 116 of the Tax Ordinance regarding tax liabilities.
Interest and Proceeding Costs The scope of liability also includes interest for delays and the costs of judicial and enforcement proceedings. The Supreme Court has indicated that board members can be held liable for interest accrued up to the point when the creditor files their claim.
Temporal Scope Liability covers obligations whose basis arose during the board member’s tenure, regardless of when the enforcement against the company is deemed ineffective.
Scope of Personal Liability
Persons Liable Article 299 KSH applies to board members formally appointed under the provisions of the KSH. It does not apply to individuals managing the company without formal appointment, although they may be held liable under general principles.
Declaratory Nature of Register Entry The entry in the National Court Register (KRS) is declaratory and does not affect a board member’s liability.
Existence of Outstanding Company Debt
Enforcement Title An enforcement title against the company is necessary. The exception is the deletion of the company from the register, which may justify pursuing claims without prior acquisition of such a title.
Challenging Debts Board members cannot effectively contest debts confirmed by a final judgment against the company unless the judgment was issued after their tenure ended.
Ineffectiveness of Enforcement
Definition Ineffectiveness of enforcement means the inability to satisfy claims from the company’s assets. It is unnecessary to pursue enforcement against all assets if the circumstances indicate the company lacks sufficient resources.
Evidence Ineffectiveness of enforcement can be demonstrated in various ways, including through an order discontinuing enforcement proceedings, the company’s balance sheet, or its accounting records.
Conditions for Exemption from Liability
Filing for Bankruptcy Filing for bankruptcy at the appropriate time exempts a board member from liability. The key is to file the petition before the company’s assets are completely depleted.
Absence of Fault A board member may avoid liability by proving the absence of fault in failing to file for bankruptcy. This includes situations beyond the board member’s control, such as illness.
Absence of Damage Demonstrating that the creditor suffered no damage despite the failure to file for bankruptcy also absolves liability.
Limitation Period
Limitation Period Liability under Article 299 KSH, being ex delicto liability, is subject to limitation periods specified in Article 442¹ of the Civil Code: three years from the creditor’s awareness of the damage and responsible party, but no later than ten years from the event causing the damage.
Commencement of the Period The limitation period begins when the creditor becomes aware of the ineffectiveness of enforcement against the company.
Relation to Other Provisions
Special Provisions Article 299 KSH does not apply to obligations governed by special regulations, such as Article 116 of the Tax Ordinance concerning public liabilities.
Exclusion of Liability Under Article 299 KSH in Case of Enforcement
Conditions for Exclusion The exclusion of liability occurs when the creditor receives full satisfaction or when liability is governed by specific provisions.
Summary
The liability of management board members of a limited liability company under Article 299 KSH serves a protective function for creditors but is subject to numerous conditions and exceptions. In practice, applying this norm requires analyzing various aspects, including exoneration conditions, the scope of obligations, and limitation periods. This provision strikes a balance between creditor protection and the accountability of board members.
