Director Liability in Poland – Personal Liability for the Debts of an sp. z o.o.

How does liability under Art. 299 CCC work?

If enforcement against the company proves unsuccessful, the management board members are jointly and severally liable with their personal assets for the company's obligations. Liability covers the company's obligations that existed while the person was on the board, even if they fell due only later.

Defences available to a board member include:

• a timely bankruptcy petition, timely opening of restructuring proceedings, or confirmation of an arrangement,
• no fault in failing to file,
• the creditor suffered no loss (it would have recovered nothing even if the petition had been filed on time).

“Timely” is not the same as the 30-day filing deadline: courts ask whether the petition was filed while the company's assets still allowed creditors to be satisfied at least in part. The board member bears the burden of proving these defences, and the “no loss” defence succeeds only rarely.

Other bases of liability

• Art. 21 of the Polish Bankruptcy Law: a duty to file for bankruptcy within 30 days of becoming insolvent, failing which there is liability for damages unless restructuring proceedings were opened, or an arrangement confirmed in PZU, within that period (this also applies to other company forms, e.g. the joint-stock company S.A.; the board member's fault and a loss equal to the unpaid claim are presumed).
• Art. 116 of the Tax Ordinance: if enforcement against the company fails, board members of an sp. z o.o., a simple joint-stock company (P.S.A.) or an S.A. are liable for the company's tax arrears that fell due during their term of office, including after leaving the board. The defences mirror Art. 299 CCC (timely filing, timely restructuring, a confirmed PZU arrangement, no fault), plus pointing to company assets from which a substantial part of the arrears can be recovered. The administrative courts apply these defences strictly: “no fault” is accepted only where the board member had no possibility at all of running the company's affairs, an internal division of tasks within the board does not help, and the assets indicated must be concrete, enforceable and cover well over half of the arrears. Similar rules apply to social security contributions (ZUS).
• Art. 586 CCC: a board member or liquidator who fails to file for bankruptcy of a commercial company despite the statutory grounds commits a criminal offence punishable by a fine, restriction of liberty or imprisonment of up to one year.

Insolvency exists, among other cases, where due obligations are no longer being paid. Illiquidity is presumed where payments are more than three months overdue. Balance-sheet insolvency requires liabilities to exceed assets for more than 24 months; this is presumed where the balance sheet shows it.

For creditors: Art. 299 CCC as a second chance

If enforcement against the Polish sp. z o.o. fails, the creditor can sue the board members personally. Requirements:

1. as a rule, an enforceable title against the company (exceptions apply, e.g. where the company is in bankruptcy or has been struck off the register; a discontinued bankruptcy with the company still registered is not enough),
2. proof that enforcement failed. Typically this is the enforcement officer's decision discontinuing enforcement, but any evidence that the company has no assets can suffice, e.g. a court order dismissing a bankruptcy petition for lack of assets,
3. identification of the board members at the relevant time (KRS history).

The claim generally becomes time-barred three years after the creditor learned, or with due diligence could have learned, of the damage and the person liable (in practice, usually once enforcement against the company has proved ineffective), and no later than ten years after the event causing the damage. Where the failure to file was a criminal offence (Art. 586 CCC), the period is twenty years from the offence. If a board member lives abroad, they can still be sued in Poland, and their personal assets abroad may be reachable.

For foreign managers of Polish subsidiaries

Many international groups appoint their own managers to the board of their Polish subsidiary. Those managers are personally liable under Polish law, even if they live abroad and look after the subsidiary only part-time. Polish courts have held that living abroad or not speaking Polish does not change this. Protection comes from:

• regular liquidity planning and documentation,
• an early-warning system (payments > 3 months overdue, negative equity),
• timely advice on choosing between restructuring and a bankruptcy petition,
• D&O insurance that covers Polish liability grounds.