Liability of management board members in a limited liability company.

I would like to start this article with a brief description of what a Polish limited liability company is and what a foreign type of company is its equivalent. This will undoubtedly help you to understand how looks like the liability of a Polish limited liability company, which is the most common type of company under Polish law.

First of all, nomenclature.

Spółka z ograniczoną odpowiedzialnością (in short Sp. z o.o.) = Limited Liability Company

Whenever your opponent is a Polish limited liability company, i.e. a company which in its name will have the ending ” Spółka z ograniczoną odpowiedzialnością, in short Sp. z o.o.’’  its liability will be as follows.

First of all, the limited liability company’s actions are simply the responsibility of the company, i.e. it is solely responsible for its own obligations. A Polish limited liability company may sue and be sued. The company is liable with all its assets and in this respect the liability is unlimited.

You are probably wondering what the problem is if the company can be held liable? What is more, it may be liable for all its assets.

The problem arises precisely with regard to the assets of a limited liability company. From our experience we can say that many companies are able to dispose of their assets and transfer them to other entities in a very skilful way. Consequently, even if you get a positive judgment from a Polish court against a Polish limited liability company, it may turn out that you will not get anything from the company’s assets, because the company simply will not have any assets, and the execution conducted by a bailiff will turn out to be ineffective.

Fortunately, Polish law provides for a solution to such a situation, which in many cases would turn out to be effective. The solution is to hold the members of the management board of the defendant company liable. Below I present chronologically what should be done to recover receivables from a member of the management board:

1. A lawsuit against a limited liability company;
2. Obtaining a positive verdict against the company;
3. The bailiff’s statement that the company has no assets and the execution from the limited liability company is ineffective;
4. A lawsuit against a member of the management board.

It is important that if there are several members of the management board, all of them will be liable and may be sued. As it happens in Polish law, there are situations in which it will not be possible to sue a member of the management board. Most of all, there are cases when a company goes bankrupt, which is something like an insolvency, which will be approved by the court. Then a completely different procedure of suing both the company and its management board members comes into play.