Holding members of the management board of a limited liability company (sp. z o.o.) liable under Article 299 of the Polish Commercial Companies Code (KSH) requires proof that enforcement against the company has been unsuccessful. This does not always mean, however, that the creditor must obtain a bailiff’s decision confirming the failure of enforcement against the company in order to trigger the Article 299 procedure. Nor does it most often mean that the mere absence of a management board is enough, on that basis alone, to sue a former board member without first going through enforcement against the company itself. So where should one start when a company has no management board but does have creditors?
What does liability under Article 299 KSH involve?
Every member of the management board of a sp. z o.o. is liable with their own assets for the company’s debts if enforcement against the company proves ineffective.
A board member can of course be released from such liability. Above all, they will be released if they prove that a petition for the company’s bankruptcy was filed in due time, or that restructuring proceedings were initiated. They may also be released if they prove that the failure to file a bankruptcy petition was not their fault, or that, even without a bankruptcy petition, the creditor suffered no loss.
How can one prove that enforcement against the company was ineffective?
The typical and most common evidence of ineffective enforcement against the company is a bailiff’s decision discontinuing enforcement due to the company’s lack of assets.
This is not, however, the only evidence. No provision prescribes a particular method or catalogue of evidence for proving ineffectiveness. A creditor therefore does not have to pursue enforcement whose ineffectiveness is obvious and known in advance.
Such “ineffectiveness known in advance” may result, for example, from:
Does the absence of a management board automatically mean that enforcement is ineffective?
Unfortunately not. These are two different problems. The ineffectiveness of enforcement concerns the company’s lack of assets, whereas the absence of a management board is a question of who represents the company. A company without a management board may well have assets, so the mere existence of such a gap does not allow a creditor to bypass the company and sue a former board member directly. On the other hand, the absence of a management board means that the statement of claim cannot be validly served on the company and that a judgment against it cannot be obtained.
Lack of a management board: how to pursue a claim?
If our debtor is a company with no management board, before bringing a claim against it we should:
The only exception to the requirement of obtaining a title against the company concerns companies deleted from the KRS register (by definition, it would not be possible to obtain a judgment against an entity that no longer exists).
Can a board member face other consequences?
Yes. Regardless of liability under Article 299 KSH, the bankruptcy court may, at the request of, for example a creditor, impose on a board member a ban on conducting business and on sitting on the governing bodies of companies for a period of 1 to 10 years, if, despite being obliged to do so, they failed to file a petition for the company’s bankruptcy.
Obtaining such a ban does not require a prior criminal conviction of the board member, or even bankruptcy proceedings having been conducted. The proceedings for the issuance of the ban are separate proceedings and are not conducted as part of the bankruptcy proceedings.
The article was co-authored by legal assistant Zofia Baurska.
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