Liability for debts in a limited liability company (sp. z o.o.) and the entry in the National Court Register (KRS)

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Liability of Board Members of a Limited Liability Company

Members of the management board of a limited liability company may be held liable for the company’s obligations under Article 299 of the Commercial Companies Code. This liability is subsidiary. This means that a board member may be held liable if enforcement against the company proves ineffective. For the liability of a board member for the company’s debts, it is important whether the person sat on the company’s body at the time the obligation existed. In this context, an interesting legal dispute arose before the Provincial Administrative Court in Gdańsk. A board member of a limited liability company stated in the proceedings that in 2017 he submitted his resignation from the office in the company body. Therefore, he defended himself by arguing that he could not be held liable for the company’s obligations from 2018. On the other hand, the authority referred to data appearing in the National Court Register.

Factual Background

In the case, the company did not fully pay the tax liabilities due for 2018. The head of the tax office could not recover the overdue amounts from the company; therefore, he found the former board member liable for the tax liabilities. The authority indicated that the individual performed the function of a board member at that time and was therefore responsible for the outstanding amounts. The former board member appealed against this decision. He stated that since 2017 he has not held any function in the company’s board because he submitted his resignation. Furthermore, he argued that he is listed in the National Court Register only because the company’s president did not submit the appropriate application to remove him from the register. However, the authority maintained during the proceedings that, according to the data disclosed in the register, he continuously sat on the company’s body since 2016 and, contrary to his claim, he also held a position on the board during the period when the tax payment deadline for 2018 expired. Additionally, the tax office pointed out that after resignation, the former board member still performed active activities on behalf of the company, including, among others, entering into contracts and signing powers of attorney. Therefore, the authority found that these actions were not performed by him as an employee but as a board member, since these tasks belonged to the competencies of the management board. The former board member filed a complaint regarding this matter.

Court Decision

The dispute was taken up by the Provincial Administrative Court in Gdańsk. The court indicated that performing the function of a board member is based on the will of the person holding it. Therefore, a person sitting on the body may resign at any time. The court pointed out that authorities must always determine in such cases whether the resignation actually occurred. Therefore, in this case, it was necessary to examine whether the activities performed by the complainant fell within the scope of a board member’s duties. The court noted that the appointment and term of office of board members is an internal matter of the company’s business management. Meanwhile, the entry of a board member and changes in this regard in the National Court Register are declaratory in nature. As a result, the entry can be annulled in specific circumstances. Ultimately, the court overturned the authority’s decision in the case.