Duties and responsibilities of the board in the event of the company's insolvency

 The bankruptcy of the company is a typical case with the loss of payment capacity. When a company goes bankrupt, its management is required to file for bankruptcy. At the end of this article we will list the circumstances when the company can be considered as insolvent.

 A few sentences about responsibility. As is known, shareholders are responsible for the company's obligations up to the amount of share capital, belonging to each of the partners. As for the board members, situation is different. It is important that in the event of the debtor's insolvency pursuant to Art. 299, p. 1 of the Commercial Companies Code, if the execution against the company proves to be unsuccessful, members of the board will be jointly and severally liable for its obligations. The above provision clearly explains that the creditor may seek to satisfy his claim from the personal assets and funds of a board member.

In accordance with the applicable regulations, the possibility of avoiding liability by members of the Management Board is allowed. It is important that it demonstrates that:

• a bankruptcy statement was filed in proper time or a decision was issued at the same time to open restructuring proceedings or to approve the composition agreement in the proceedings to approve the arrangement;
• the failure to submit applications occurred without the fault of a member of the management board;
• failure to submit applications in due time did not cause any damage to creditors.

It should also be taken in mind, that a statement for bankruptcy may be filed only by members of the management board, creditor or prosecutor. Informal representatives are not obliged to do this.

The conditions that have arisen in the company must be determined by an appropriate expert. A board member or liquidator are obliged to file a bankruptcy statement of a limited liability company within 30 days from the date of recognition of the grounds for insolvency. The fee for the application is 1000 PLN. It is also necessary to make an advance payment for bankruptcy proceedings in the amount of PLN 4,821.80. Moreover, criminal liability is provided for failure to submit the statement for bankruptcy on time.

An alternative in the case of bankruptcy of a company due to the liability of members of the management board of a limited liability company is to present that composition proceedings have been initiated in a proper time. In such a situation, the application for restructuring of the company should be submitted sufficiently in advance.

According to the Law from 28 February 2003 - The Bankruptcy Law specifies in Article 11 what means that the debtor is insolvent when:

1. A debtor is insolvent if he has lost the ability to perform his pecuniary obligations.

1a. It is presumed that a debtor has lost the ability to perform his or her pecuniary obligations if the delay in performing pecuniary obligations exceeds three months.

2. A debtor who is a legal person or an organisational unit without legal personality and to whom a separate law grants legal capacity shall also be insolvent if his pecuniary obligations exceed the value of his assets and the situation persists for a period exceeding twenty-four months.
3. The assets referred to in section 2 do not include components not included in the bankruptcy estate.
4. The pecuniary obligations referred to in section 2 do not include future obligations, including obligations under a suspensive clause and obligations towards a shareholder’s or partner’s loans or any other legal act having similar effects.
5. Monetary liabilities of a debtor shall be presumed to exceed the value of his assets if, in accordance with the balance sheet, his liabilities, excluding provisions for liabilities and liabilities to affiliated entities, exceed the value of his assets, and this situation persists for a period exceeding twenty-four months.
6. The court may dismiss the motion to declare bankruptcy, if there is no threat of losing the debtor's ability to perform his due pecuniary obligations in a short period of time.
7. The provisions of sections 2-6 do not apply to partnerships in which at least one partner responsible for the obligations of the partnership is a natural person.

We would like to remind you that ignorance of the law does not exempt you from liability. We recommend you to approach to your business as responsibly as possible and if you have a dispute, seek the advice of a specialist in this area.