Article 299 of the Commercial Companies Code (“CCC”) establishes the joint and several liability of board members for their company’s obligations in a situation where enforcement against the company proves ineffective. A board member can avoid liability if he/she proves that he/she filed a petition for bankruptcy within a deadline or that the failure to do so was not his/her fault (board members have two weeks to submit the petition from the date of the company’s insolvency – from the beginning of 2016 the deadline will be extended to 30 days).
Thus, the above provision is “the last ray of hope” for creditors seeking satisfaction against an insolvent company and creditors often use it in practice. As a consequence, while assessing a company’s financial capacity, board members should always bear in mind the potential personal liability vis-a-vis the company’s creditors. Pursuant to the latest judgment of the Supreme Court, the uncertainty of board members may last as long as 20 years.
The Supreme Court, in its judgment of 9 April 2015 (ref.no.V CSK 441/14), stated that for the purposes of an action against a board member based on Article 299 of the CCC, a civil court may make an assumption according to which negligence consisting in the failure to file a petition for bankruptcy of a commercial company, despite the occurrence of the grounds specified in the Act for doing so, constitutes a tort. Consequently, a claim under Article 299 of the CCC may expire only after the lapse of 20 years from the date of the offence.
First of all, the Supreme Court took a strong stance on the nature of a board member’s liability. Although this issue is the subject of numerous controversies, the Supreme Court explicitly approved an opinion according to which a board member’s liability has the attributes of a tort.
As a consequence of assuming that a board member’s liability has the attributes of a tort, one has to apply the provisions of the Civil Code on limitation periods related to claims in tort. As a rule, a claim in tort expires after three years from the date on which the injured party learned about the damage and the person liable, however, not more than 10 years from the date on which the harmful event occurred. In judicial practice the courts apply the above limitation period while assessing the issue of limitation of claims against a board member.
The Supreme Court went a step further. It noted that a failure to file a petition for bankruptcy of a company within a deadline can simultaneously have the attributes of an offence as specified in the Code of Commercial Companies. A board member may in fact be held criminally liable for an offence consisting in a failure to file a petition for bankruptcy of a commercial company despite the existence of grounds for doing so. The offence is punishable by a fine, restrictions on freedom or imprisonment for up to a year. The Supreme Court also highlighted that a court in civil proceedings is entitled to assess independently whether the defendant's conduct constituted a criminal offence, regardless whether criminal proceedings were conducted against a board member.
The judgment of the Supreme Court is of great practical importance. The Supreme Court held that while the attributes of a tort specified in the Commercial Companies Code are fulfilled, one has to assume that the creditors’ damage resulted from a criminal offence. Consequently, according to the Supreme Court, the limitation period relating to claims for repair of damage caused by a criminal offence is applicable, which in any case is 20 years from the date of the offence.