Management board members' 'occupational risk'
Management board members of Polish joint-stock companies are thought to be in a safer position than their counterparts in Polish limited liability companies because there is no equivalent of Article 299 of the Polish Commercial Companies Code (KSH). That provision makes management board members of a limited liability company jointly and severally liable for its debts if enforcement against the company proves ineffective.
That view is only partly correct. It overlooks Article 116 of the Tax Ordinance, which applies not only to tax liabilities broadly understood, but also to social and health insurance contributions and contributions to the Labour Fund, Guaranteed Employee Benefits Fund and Bridging Pensions Fund. For these liabilities, board members of both company types are jointly and severally liable with all their assets if enforcement against the company is wholly or partly ineffective.
Liability for company arrears
Can a board member escape liability for company arrears? They may prove, bearing the burden of proof, that a bankruptcy petition was filed, restructuring proceedings opened or a restructuring arrangement approved in time, or that failure to petition occurred without their fault. For example, grounds for bankruptcy may have arisen when they no longer had influence over the necessary steps because they had ceased to hold office.
Enforcement is ineffective when the creditor has exhausted all available methods without recovering the full arrears. A board member may therefore also escape liability by identifying other company assets enabling a substantial part of the tax arrears to be recovered. The assets must actually exist and be available for enforcement.
Conversely, reasonable steps to improve profitability do not release a board member from liability if they fail. Preparing a recovery plan, attempting debt restructuring or seeking an investor provides no defence where those efforts produce no result.
Case law has diverged on a key issue concerning board members who did not actually know the full financial picture, for example because their remit was technical or commercial, or who held office only formally without participating in company activities.
Some Supreme Administrative Court panels, with similar reasoning in appellate cases on contribution liabilities, interpret 'performing the duties of a management board member' as actually exercising them, rather than merely having a KRS entry. Applying the fault principle, Tax Ordinance liability would therefore exclude someone with no real influence over company affairs when the arrears arose: Supreme Administrative Court judgment of 27 June 2014, II FSK 1860/12.
It should also be mentioned that joining the governing board of other legal persons, such as cooperatives, foundations and associations, or even ordinary associations (stowarzyszenia zwykłe), a simplified form of association without legal personality, requires careful thought. The Tax Ordinance provisions on company board liability apply, with the necessary adaptations, to those managing other entities. In practice, the most frequent problems involve misunderstandings over VAT on non-profit organisations' transactions.
More on board members' liability and other legal aspects of managing Polish joint-stock and limited liability companies:
Michał Górecki, Polish attorney-at-law
m.górecki@i-dgp.com
