Are you a member of the management board of a limited liability company? Find out when you'll be liable for the company's debts from your own assets! [Article 299 of the Commercial Companies Code]

A limited liability company is a relatively "safe" form of business, but not always.

A limited liability company is considered one of the safest forms of running a business. It's often associated with the idea that partners and management board members are not liable for the company's debts. This isn't entirely true. In the event of a company's financial problems, the partners are safe, but management board members may be liable for the company's debts!

Taking up the position of a board member in a limited liability company means not only prestige and decision-making, but also real legal and financial responsibility. Many managers and business owners harbor the misconception that "I'm safe with a limited liability company." Unfortunately, in practice, this isn't the case.

Pursuant to Article 299 of the Commercial Companies Code, if the company fails to settle its obligations and enforcement against its assets proves ineffective, the creditor may sue you as a member of the management board and demand payment from all your private assets.

Contents:

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Art. 299 of the Commercial Companies Code – what exactly does the law say?

Pursuant to Article 299 §1 of the Commercial Companies Code:

"If enforcement against a limited liability company proves ineffective, the members of the management board are jointly and severally liable for its obligations."

This means that:

• if the company has no assets or is insolvent,
• and the creditor has exhausted the enforcement procedures,
• he may direct his claims directly to a member of the management board.

AND a management board member may be liable with all his personal assets, regardless of the amount of the company's debt.

What exactly are you responsible for as a board member?

In short, you are responsible for failure to act. Not for the company's debt itself, but for failing to react in a timely manner. when financial problems arose.

When can a management board member avoid liability?

However, the law provides for certain circumstances excluding liabilityPursuant to Article 299 §2 of the Commercial Companies Code, a management board member may defend himself if:

✅ A bankruptcy petition was filed in due time,

✅ a decision was issued in due time to open restructuring proceedings or to approve the arrangement in the proceedings on approval of the arrangement
✅ The failure to file the bankruptcy petition referred to above occurred without the fault of the management board member

✅ Despite the lack of the above, the creditor did not suffer any damage.

In practice, this means that a management board member should act quickly and responsibly if he or she knows that the company will not repay its liabilities – because any omission may cost him personally.

It is worth remembering that in accordance with Article 299¹ The Company's liquidators also bear the same liability.

What obligations can a management board member be held liable for? The key factors are the timing of their inception and the length of time they serve.

Contrary to appearances, a management board member is not automatically liable for all the company's debts – the scope of this liability depends on several factors:

– the time when the obligation arose,

– maturity date of the obligation,

– the time you held the position

– the date of the company’s insolvency,

Remember that you are responsible for both civil and public law liabilities (e.g., taxes). However, in the case of public law liabilities, different rules of liability apply, as regulated by the Tax Ordinance.

The most common mistakes made by board members that result in liability

❌ Waiting too long to declare bankruptcy
❌ Lack of documentation confirming the absence of fault (e.g. health problems),
❌ Failure to secure company assets
❌ Taking last-minute actions that may be considered acting to the detriment of creditors

Summary: a limited liability company does not always protect the management board from debts

If you are a member of the management board of a limited liability company – don't assume that "they won't do anything to me anyway"In the event of problems with the company's solvency:

✅ Monitor the financial situation of the company,
✅ React immediately if arrears occur,
✅ Consult with legal counsel – even a single omission can result in personal liability.

In the following parts:

1. Liability of a management board member for public law obligations, including taxes
2. Criminal liability of a management board member related to the company's debts.