In one of the last posts from the #compliance series, we raised the issue of excluding the liability of a management board member under Article 299 § 1 of the Commercial Companies Code by filing an effective petition for declaring bankruptcy in due time in the event of the company's insolvency .
It is obvious that filing a bankruptcy petition alone is not sufficient to effectively release management board members from liability for the insolvent company's obligations. A management board member must file the petition in a timely manner , i.e., within 30 days of the occurrence of the grounds for insolvency, and the petition in question must be filed effectively . Therefore, in today's post, we will focus on Article 299 § 2 of the Commercial Companies Code regarding the effective filing of a bankruptcy petition in a timely manner.
In order to determine the appropriate time for filing a bankruptcy petition, it is necessary to first of all refer to the circumstances that materialize the obligation to file it.
First, the company must be insolvent . In one of the previous articles in our series, we described what corporate insolvency is and when it occurs – link to the article.
Secondly, to successfully file for bankruptcy, a company must have at least two creditors .
If the management board members determine that the company has become insolvent and the number of creditors exceeds two , each management board member (regardless of the established method of representation) is required to file a bankruptcy petition within 30 days of the occurrence of the insolvency . As of December 1, 2021, bankruptcy petitions must be filed via the electronic system, the National Debt Register. Bankruptcy cases are heard by the court with jurisdiction over the debtor's (company's) principal business center.
As previously mentioned, a bankruptcy petition must be filed effectively. It's important to remember that filing a bankruptcy petition alone isn't sufficient to release management board members from their liability.
Example:
A management board member filed a bankruptcy petition on time, but the court noted formal deficiencies, including failure to attach required attachments, such as proof of payment of the filing fee or proof of an advance payment to cover the initial costs of bankruptcy proceedings. A petition with such deficiencies is ineffective . If the management board members fail to correct the deficiencies within the deadline, the petition will be returned, and the deadline for filing a bankruptcy petition has been missed, resulting in the management board members not being released from joint and several liability for the insolvent company's obligations .
As a side note, it's worth mentioning that a document tainted with formal deficiencies has no legal effect (is ineffective) and the court cannot properly proceed with the case. Therefore, special attention should be paid to the mandatory attachments required for a successful bankruptcy petition.
Another issue is estimating the correct time limit for filing a bankruptcy petition by management board members . As mentioned, filing a bankruptcy petition is insufficient in itself. If the petition is filed after the deadline, management board members cannot release themselves from liability under Article 299 § 1 of the Commercial Companies Code. Therefore, a bankruptcy petition should be filed within 30 days of the company becoming insolvent. To clarify this, let us recall that insolvency is the debtor's inability to meet its current obligations. The Bankruptcy Law specifies that a state of insolvency occurs when an entity is unable to meet its current obligations for at least three months . Insolvency occurs at the end of the third month in which the company was obligated to settle its current obligations.
Importantly, a management board member cannot claim lack of knowledge of the company's financial insolvency when objectively insolvency existed at the time they took office, but through inattention or negligence they failed to analyze the financial books and documentation . It is worth citing the Supreme Court ruling of March 15, 2018, file reference III CSK 398/16, Legalis, which stated that " (...) the relevant time within the meaning of Article 299 § 2 of the Commercial Companies Code means the moment when, while it is true that not all the creditors can be satisfied, there are still company assets that will allow for at least partial satisfaction of its creditors in bankruptcy proceedings . " Therefore, a management board member is obligated to, immediately after taking office, thoroughly review the company's financial condition and, in the event of insolvency, file a bankruptcy petition. deadline for filing a bankruptcy petition specified in the Act should be calculated separately for each management board member , i.e., from the date the member assumes office. Established case law indicates that a management board member is obligated to file a bankruptcy petition when the company becomes insolvent, regardless of its assets, and therefore also when the bankruptcy petition would be dismissed due to the indigence of the estate (see: judgment of the Poznań Court of Appeal of December 18, 2018, I AGa 205/18, Legalis ). It is also noted that dismissing a bankruptcy petition due to the debtor's indigence (insufficient assets to cover the costs of the proceedings and the creditors) paves the way for the creditors of the indebted company to effectively pursue their claims directly against management board members.
In summary, if you serve as a management board member in a limited liability company, it is your responsibility to continually monitor the company's financial situation to prevent the court from deeming the filing of a bankruptcy petition to be late . Furthermore, you should also ensure that the bankruptcy petition is filed effectively, meaning that it is free from formal deficiencies that would prevent it from proceeding .
This article is for informational purposes only and does not constitute legal advice.
Legal status as of August 16, 2022
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