Liability of statutory body towards company’s creditors

26. 4. 2018

Last year, the Supreme Court of the Czech Republic heard a (unfortunately not so uncommon) case in which the company, already insolvent, ordered goods from a supplier for which the company did not pay. The creditor, however, did not register its receivable for the purchase price into the insolvency proceedings, which later commenced, but brought the respective claims by bringing action directly against the company’s executive.

The basic prerequisite for successfully claiming statutory body’s liability for failing to file for insolvency, is registration of the receivable to the insolvency proceedings. Nevertheless, even if a receivable is not registered or the requirements for liability of the statutory body for not filing for insolvency are not met, it does not result in the creditor’s incapability to claim the receivable on the grounds of the liability of the statutory body for damages caused by not exercising due managerial care.

The arguments included in the legal action must obviously state whether the creditor makes its claims on the grounds of a statutory member’s failure to file for insolvency in time, which resulted in not providing the creditor with such satisfaction as though if filed timely or on the grounds of the statutory body member’s failing to perform its duties with due managerial care and, hence, the creditor may not claim the compensation from the company itself and is only left with the option of bringing an action directly against the statutory body member who is personally liable for the company’s liabilities as a result of failing to perform its duties duly.

The second option is used by the creditors if they have not been able (for whatever reason) to register their claim to the insolvency procedures in respect of the company in time.

It is possible to claim, therefore, a lawsuit in similar cases needs to be articulated carefully and all factors of the case need to be taken into consideration. When considering the aforementioned options, a special attention needs to be paid to the fact whether all conditions and prerequisites stipulated by law and amended by stabilized case law have been met.

What is more, it should be noted that the case dealt with by the Czech Supreme Court in a commented ruling was heard when the old regulation of the Commercial Code was effective, whereas the current Business Corporation Act imposes even stricter requirements on statutory body members as far as their responsibilities regarding managing the companies are concerned. At the same time, it enables creditors to claim compensations for their receivables from statutory bodies if they did not perform all reasonably expectable actions needed to avoid insolvency. Their liability may prove to be a simple yet powerful instrument for the creditors which could enable them to satisfy their otherwise probably irrecoverable receivables.

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