The case against the former CEO in a Polish limited liability company collapsed yesterday as the Court of Appeal in Warsaw dismissed the claims of the creditors. This brought an end to the four-and-a- half year proceedings. Filip Kowalczyk, who is representing the former CEO, said “ it was deeply shocking that he’d been dragged through this for four years of his life, only for to win the case yesterday
.” The yesterday’s verdict of the Court of Appeal is a major milestone in the history of Polish courts deciding on the personal liability protection granted to directors and officers as human individuals.
The CEO in a Polish limited liability company, who did not file for bankruptcy on time is personally liable for the company’s debts, if only the enforcement against the company turns out to be ineffective. This liability is almost automatic which is unique comparing with other jurisdictions. This results from Art. 299 of the Commercial Code which says that if the enforcement against the company turns out to be ineffective, the members of the board are jointly and severally liable for the company’s debts.
So, if the company has no assets and no money, each of the company’s creditor is allowed to sue the CEO for the unpaid debt together with interests and the costs of enforcement proceedings.
The CEO will not be held liable for the company’s debts if he can prove that:
- he filed petition for bankruptcy on time (within 30 days from the moment the company became insolvent) or
- the claim should not be pursued at all (e.g. it is time-barred) or
- the creditor did not incur any damage (i.e. that even if the petition for bankruptcy was filed on time, the creditor would not have been able to receive any money).
What is really interesting is that the only thing which the creditor (acting as a plaintiff) has to prove in the proceedings against the CEO is that the enforcement against the company was ineffective. Normally in civil cases, the plaintiff has the burden of proving his case by presenting evidence but in the case of personal liability of directors - it is the other way round. It is the CEO who has the burden of proving his case if he wants to exonerate himself.
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