The newly introduced laws let members of companies' management boards avoid liability for the company's debts in situations in which they would have faced unlimited liability with all their assets.
The liberalization of the prerequisites for declaring consumer bankruptcy has made life easier for many indebted companies' board members by giving them the opportunity to exculpate, i.e., to practically free themselves from the company's debts. Prior to the change in the regulations, once a board member filed for consumer bankruptcy, it was checked whether that member of the company's management board had filed for the company's bankruptcy once they had to do so due to the company's insolvency (the Polish bankruptcy law obliges members of the management board to file for bankruptcy within 30 days from the date the company becomes insolvent). If the debtor was passive in this aspect, the board member's consumer bankruptcy motion could have been dismissed, which would deprive them of the right to a debt relief. The board member could then do nothing more but to try to prove that the company's failure to file for bankruptcy did not harm its creditors, which is extremely rare in practice.
At the very moment, the fact that a board member has not timely filed for the company's bankruptcy does not deprive them of chances to declare consumer bankruptcy and thus obtain a debt relief, and a board member may file a consumer bankruptcy motion also in the event of a late bankruptcy motion filed on behalf of the company they manage. Therefore, thanks to the changes in the law, the board members have gained the opportunity to avoid liability for the company's debts.
Serving as a member of a company's management board involves a risk because board members may be found liable for the debts of the company they manage (which arose while they were in charge) with all their assets without limit. This liability is therefore very strict, and although it is subsidiary in nature, i.e. it arises after an ineffective enforcement against the company's assets, in practice board members are not released from this liability. Only the creditor's way to enforce the claim is to a certain way prolonged. Therefore, the company's debts can become the debts of the member of the management board or the CEO of the company once the court issues a judgment ordering the management board to repay the debt as a result of an action for payment of the company's debts brought by the creditor against the member of the management board.
Since the company's debts usually significantly exceed the value of the board member's personal assets (which almost automatically leads to their insolvency), the possibility of declaring consumer bankruptcy of such a board member may be extremely important. Moreover, consumer bankruptcy does not exclude the bankrupt from participation in the company's management board in the future, since a ban on holding a position of a member of the management board does not have to be issued, as it is the event of statements of claim for payment filed based on the provisions of the Polish Commercial Companies Code against members of the management board who have not timely filed for their company's bankruptcy.
If a board member wishes to declare consumer bankruptcy, and this way release themselves from debts, they must be insolvent, and thus have lost the ability to pay maturing monetary obligations, which should not be difficult to prove since as I have already indicated, usually the company's debts significantly exceed the board member's personal assets. Plus, when it comes to consumers, in order to satisfy the most important premise of insolvency, it is enough when the consumer is unable to repay at least one of their liabilities.
Furthermore, in order to declare consumer bankruptcy, it is necessary to not have the status of an entrepreneur, and therefore not to carry on business activity professionally or in one's own name. If a member of a company's management board has an employment contract, he/she is also eligible for consumer bankruptcy.
Thus, there are no formal obstacles to declare consumer bankruptcy of a member of a company's management board.
Finally, it is worth pointing out that while an indebted board member may stay in the company structure , which is very common in practice, it might adversely affect the company , for example, its ability to obtain external financing. Such difficulties most often occur when a company applies for a lease or an investment loan, for the bank verifies not only the company itself, but also its board members. If the board member is indebted, and thus he/she has a poor credit history, it is possible that the bank's decision will be negative.
The above circumstances and personal reasons (since enforcement can be carried out against all the board member's assets) make the consumer bankruptcy an extremely helpful rescue for companies' board members that may let them get back to business with a so-called "carte blanche."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
