LIABILITY OF THE BOARD OF DIRECTORS OF THE LIMITED LIABILITY COMPANY UNDER ART. 299 COMMERCIAL COMPANIES CODE
In Poland a member of the board of the limited liability company (spółka z o.o.) may be liable for the debt of the company. Such cases are quite often when the company has no money to satisfy its debts. Therefore this type of litigation is sometimes the only way to recover the debt. One must remember that shareholders are not liable for the debts of the company. Art. 299 of Polish Commercial Companies Code (CCC) is a legal provision that regulates relations between creditors and a member of the board. On one hand the legal provision enables satisfaction of the claim in certain circumstances and on the other hand it does not allow for the excessive burden of the member of the board. It is a unique Polish legal instrument with a tradition reaching the year 1933.
What is a member of the board liable for?
The most frequent cases concern unpaid claims of firms for goods and services that were purchased by the debtor company. However other persons may also be the creditors including employees and injured by the tort or non-performance of the company. Art. 299 of CCC does not limit the scope of the receivables and concerns all of the private law claims.
Not only members of the board
It is worth mention that not only members of the board of a limited liability company (sp. z o.o.) may be liable but also the liquidator (except for the liquidator appointed by the court). Furthermore beginning from March 1st, 2021 members of the board of the simple joint-stock company will also be liable under art. 300132 CCC according to the same rules.
Liability only after ineffective enforcement proceedings
The member of the board is not liable under the same rules as the company. There is an additional condition that must be fulfilled in order to demand claim from the member of the board i.e. the ineffectiveness of the enforcement proceedings against the company. Only when the company has no assets to satisfy the creditor it is possible to file a lawsuit against the member of the board. Therefore the liability is called subsidiary.
Defense of the member of the board
The goal of art. 299 CCC is not charging the members of the board with the unlimited liability for the debts of the company in all situations but only in the event when they conducted the affairs of the company in an indiligent manner causing ineffectiveness of the enforcement proceedings from the property of the company. Therefore the member of the board may raise several defenses against the lawsuit. Thus the liability and litigation is not automatic if the member of the board proves that he fulfilled his duties.
Filing of the motion for bankruptcy
In case a member of the board proves that he filed the motion for the bankruptcy of the company in the right time he will not be liable for its debts. The diligence in filing of the motion in time is a fundamental duty of the member of the board the breach of which may result in a serious financial liability. The same effect a member of the board may achieve if he proves that the decision on opening of reorganization proceedings or approval of composition agreement in the proceedings for approval of composition agreement was issued.
No fault or no damage
A member of the board may also use a defense of the lack of fault in non-filing of the motion for the declaration of bankruptcy of the company e.g. due to illness. He can raise that despite non-filing of the motion for bankruptcy or non-issuing of the decision on opening of the reorganization proceedings or non-approval of the composition agreement the creditor has not suffer a damage, since even if he behaved correctly the creditor would not be satisfied.
Additional defenses
It is worth notice that members of the board are not liable for non-filing of the motion for bankruptcy when the enforcement proceedings trough compulsory management or sale of the enterprise are pending if the duty to file the motion appeared during the enforcement.
The above mentioned defenses are described in details in the legal provision in question however there are lots of situations when members of the board liability is examined and they may released from liability in other cases as well. Jurisprudence being a source of such examples of judgments has been analyzed in my former publications (see: Daniel Dulęba, Comments on the Judgment of Supreme Court – Civil Division of 24th June2004 r. III CK 107/2003, Rejent 2006/9; Article: Procesowe aspekty odpowiedzialności członków zarządu spółki z o.o. na podstawie art. 299 k.s.h. (Procedural aspects of liability of members of the board of limited liability company under art. 299 of commercial companies code), Prawo Spółek 2008/5; Book: Odpowiedzialność członków zarządu spółki z o.o. na podstawie art. 299 kodeksu spółek handlowych (Liability of members of the board of limited liability company under art. 299 of commercial companies code), Toruń 2008).
