Has the Constitutional Court made it possible for members of the management board of limited liability companies to incur and fail to pay debts with impunity?

Until now, the liability of members of the management board of a limited liability company for its obligations was decided in the overwhelming majority of cases - the moment it was incurred. However, the situation has changed significantly due to a recent ruling of the Constitutional Court.

When one does not know what is at stake

The basis for the ruling of the Constitutional Tribunal of 12 April 2023 was a payment case brought before the District Court for the capital city of Warsaw in Warsaw, XV Commercial Division, case file No. XV GC 3898/15. The plaintiffs sought payment of an amount adjudged in their favour from a limited liability company. As is often the case in such cases, enforcement against the aforementioned entity proved ineffective. Having failed to obtain satisfaction from the company's assets, the plaintiffs submitted their claims to the members of the company's management board who held office at the time when the claim arose. The defendants - former members of the company's management board - disagreed with the claims directed against them and disputed the existence of the claim itself.

Unfair treatment

The Warsaw Court, however, raised doubts about the constitutionality of the statutory grounds for the liability of the former members of the management board and asked the Court to assess them. In addressing the questions, the common court alleged that in the course of proceedings against members of the management board, it cannot examine the existence of a claim established by a judgment made against the company, as it is already bound by it. The above, in the opinion of the aforementioned Court, deprived the defendants of the right to a hearing, making it impossible to prove that the plaintiff's claim, as established by the judgment made against the company, did not exist. At the same time, the District Court assessed that the above situation violated the constitutional right to a court and thus also violated the constitutionally protected property interest of the defendants by exposing them to the necessity of satisfying a potentially unjustified demand, at the expense of their property.

The Court has spoken

Having analysed the content of the District Court's question, the Court concluded that it is unacceptable from the point of view of the right to court to have a situation in which there is a dispute between a creditor and a debtor - the creditor asks the court to resolve this dispute - and the ‘subsidiary’ debtor (former member of the management board) not only has no opportunity to participate in the court proceedings, but is not aware that such proceedings are taking place at all. This, in the Court's view, leads to an indirect shaping of the legal position of the debtor, in this case a former member of the company's management board, without his or her knowledge and participation in the proceedings. In view of the above, the Court held that the provision of Article 365 § 1 of the Code of Civil Procedure, to the extent to which it provides for the court to be bound by the decision, based on which ineffective enforcement was initiated against a limited liability company, in a proceeding under Article 299 § 1 of the Code of Commercial Companies against a defendant who lost his status of a member of the management board of the company prior to the date of commencement of the proceeding in which the decision against the company was made, is unconstitutional.

The Court further considers the content of the provisions of Article 299, paragraphs 1 and 2 of the Polish Code of Commercial Partnerships and Companies (Kodeks spółek handlowych - Kodeks spółek handlowych - Kodeks spółek handlowych), stating that to the extent in which the above provisions do not provide for the possibility for a defendant former member of the management board of a limited liability company to free himself from liability by proving that a claim, as confirmed by a ruling on the basis of which ineffective enforcement was initiated against the company, does not exist in a situation in which the ruling was made in a proceeding initiated after the date on which the defendant lost the status of a member of the management board of the company, they are unconstitutional. This means that the Court found a so-called legislative omission and, consequently, without changing the content of the law, introduced into Article 299 of the Code of Commercial Companies a a separate exoneration premise - in the form of the possibility to prove the non-existence of a claim against defendants, who left (were dismissed) from the company's management board before the judgment on this claim was issued (e.g. for the return of the amount granted under a loan agreement).

Perspective depends on the point of view of the observer

With this ruling, the Court ended the doctrinal disputes concerning the principles of liability of members of the management board in situations where they left or were dismissed from their positions before the creditor initiated proceedings against the company or before there was a final judgment establishing the company's liability for a debt incurred. Of course, when deciding such a debatable issue, creditors will say: ‘Scandal, the end of democracy, I will never get my money back, and the one to whom, for example, I lent money will remain unpunished’. Defendant board members, on the other hand, will state with relief: ‘This is justice - why should I be held responsible, for the fact that the company did not pay its obligations when I had already left it’. There is no doubt that the Court's ruling may save some and plunge others. At the same time, however, particularly as regards the unconstitutionality of Art. 365 of the Code of Civil Procedure, it may become a gateway for dishonest members of management boards who, having the authority to incur liabilities on behalf of the company, will do so on a scale exceeding the entity's financial capabilities and then resign from their positions to avoid potential liability for damages to creditors. Unfortunately, the above scenario seems unavoidable.