Liability of Management Board Members in Limited Liability Companies (sp. z o.o.), Joint-Stock Companies (S.A., P.S.A), and Foundations Conducting Business Activity (Fundacja) in Poland

(Author: Kacper Warzecha, Legal Counsel. Edited by CT)

Management board members in entities such as limited liability companies (sp. z o.o.), joint-stock companies (spółka akcyjna), and foundations (fundacja) conducting business activity in Poland bear multifaceted responsibility for their actions and omissions. This responsibility extends towards the entity they represent, third parties, and state authorities. In this article, we will analyze the scope of their civil, corporate, criminal, and fiscal liability, alongside the potential legal consequences.

1. Civil and Corporate Liability of Management Board Members

A. Liability Towards the Entity They Represent

Management board members are obligated to act in the best interest of the entity they represent and to comply with legal and internal rules (e.g., company agreements or statutes). When failing to fulfill these obligations, they may be held accountable for the following:

1. Financial Liability Towards the Company
   • Pursuant to Article 293 of the Polish Commercial Companies Code (Kodeks Spółek Handlowych, KSH), management board members of limited liability companies (sp. z o.o.) are liable for damages caused by actions or omissions that violate the law or the company’s articles of association. Similarly, in joint-stock companies (spółka akcyjna), Article 483 KSH imposes equivalent liability on board members.
   • Damage to the company may encompass direct financial losses or lost opportunities (e.g., missed business deals).
2. Corporate (Disciplinary) Liability
   • Dismissal from the Management Board: A management board member may be dismissed by the shareholders (in sp. z o.o.) or the supervisory board/general meeting of shareholders (in spółka akcyjna) in the event of loss of trust or causing harm to the company.
   • Termination of Employment: If the board member is employed under an employment or civil law-based contract, their agreement may also be terminated.

B. Liability Towards Third Parties

Management board members may also be liable towards third parties, such as creditors or business partners, primarily on a subsidiary basis:

• Creditors may pursue claims against the management board members only if the enforcement proceedings against the company’s assets prove to be ineffective (as stipulated in Article 299 KSH for sp. z o.o.).
• The liability encompasses the personal assets of management board members.

2. Criminal and Fiscal Liability of Management Board Members

A. Liability for Their Own Actions or Omissions

In the performance of their duties, management board members may be held criminally liable for:

1. Towards the Entity They Represent
   • Forging or falsifying company documents (e.g., financial records), which could harm the company’s interests.
2. Towards Third Parties
   • Knowingly misleading business partners, such as extending payment deadlines while concealing the company’s insolvency.
3. Towards State Authorities
   • Failing to file a bankruptcy petition on time, which is the duty of management board members under Article 21 of the Polish Bankruptcy Law (Prawo upadłościowe).

B. Liability for the Actions or Omissions of the Entity Represented

Management board members may also be liable for the actions (or omissions) of the company as a legal entity. Examples include:

1. Towards Third Parties
   • Providing services or selling products in violation of the law, such as infringing intellectual property rights.
   • Failing to meet payment obligations towards creditors.
2. Towards State Authorities
   • Tax Obligations: Failure to pay taxes, including VAT, corporate income tax (CIT), or social insurance contributions, is a significant issue under Article 586 KSH and Article 116 of the Polish Tax Ordinance (Ordynacja podatkowa).

C. Criminal Penalties

Penalties for offenses committed by management board members may include:

• Fines – For breaches of fiscal or criminal laws.
• Imprisonment – For serious financial or tax-related offenses.
• Other Sanctions – Such as disqualification from serving on corporate boards in the future.

Summary

Management board members in limited liability companies (sp. z o.o.), joint-stock companies (spółka akcyjna), and foundations conducting business activity in Poland face various layers of accountability. This includes civil and corporate liability towards the entity they represent, as well as criminal and fiscal liability towards third parties and state authorities. It is essential for board members to act lawfully, in the interest of the entity, and with due diligence. Failure to meet these obligations can result in severe legal and financial consequences, including personal financial liability and, in serious cases, criminal prosecution.

Sources:

1. Polish Commercial Companies Code (Kodeks Spółek Handlowych):
   • Article 293 (Liability in sp. z o.o.).
   • Article 483 (Liability in spółka akcyjna).
   • Article 299 (Subsidiary liability of management board members in sp. z o.o.).
2. Polish Bankruptcy Law (Prawo upadłościowe): Article 21 (Obligation to file for bankruptcy).
3. Polish Tax Ordinance (Ordynacja Podatkowa): Article 116 (Board members’ liability for tax obligations).
4. Expert Commentary and Literature:
   • “Commentary on the Polish Commercial Companies Code”
   • “Management Board Liability Under the Polish Commercial Companies Code”
5. Online Resources:
   • Gov.pl, Polish Company Law Overview.
   • Lex.pl, Management Board Members’ Liability.