Who is liable for the debts of a limited liability company and when?

Who is liable for the obligations of a limited liability company?

The members of the management board and not the partners of the limited liability company are liable for the obligations of the limited liability company.

Established in Polish law, it is therefore a civil law sanction for improper management of the company’s affairs.

The existence of this liability is primarily in the interest of creditors, but also in the interest of the company’s shareholders, who are concerned that the persons managing their company look after its interests.

When does this liability arise?

The liability of a member of the management board of a limited liability company arises when enforcement against the company proves ineffective.

However, it is important that the ineffectiveness relates to all the company’s assets, i.e. the company has no assets.

This does not mean that the creditor has to carry out enforcement against all assets – sometimes this would not be justified at all – it is necessary to demonstrate that carrying out enforcement against all assets will not lead to satisfaction of the creditor.

The liability of a board member is therefore of a subsidiary nature, i.e. one that ‘activates’ only when enforcement against the company’s assets is not possible.

If there are several board members in the company, they are jointly and severally liable with each other.

Is a member of the management board liable for all debts of the company?

Management board members are liable for those debts of the company in respect of which the creditor has not obtained satisfaction from the company’s assets.

The source of these liabilities may be of both public and private law nature.

Members of the board of directors are liable for all those liabilities which arose during their mandate on the board of directors of the company.

Importantly, these liabilities do not have to become due and payable during their mandate, it is sufficient that they only arose.

Similarly, a member of the management board will not be liable for those liabilities which arose before or after his or her position on the management board.

Is a board member also liable for interest and legal costs?

A member of the management board who is responsible for the company’s liabilities is also liable for interest for late payment by the company as well as for all costs related to the recovery of debts from the company, i.e. costs of court or enforcement proceedings.

Can a member of the management board free himself/herself from this liability?

Yes, a member of the management board may free himself from liability for the company’s debts if only he proves that:

1. 1. he/she filed a bankruptcy petition in due time or a decision on the opening ofrestructuring proceedings was issued at that time ; he/she
   2. is not at fault in the failure to file a bankruptcy petition of the company;
   3. the creditor did not suffer any damage despite, the failure to file a bankruptcy petition and the failure to issue a decision on the opening of restructuring proceedings or the failure to approve the arrangement in the proceedings for the approval of the arrangement

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