And the risk does not only apply to the company. Members of the management board may be liable with all their assets, face criminal charges, and even be excluded from economic life for many years. In this article, we explain when the obligation to file for bankruptcy arises, what the consequences of ignoring it are, and when personal liability can be limited.

When and who is required to file for bankruptcy?

The obligation to file for bankruptcy arises when the debtor becomes insolvent – and must be fulfilled within 30 days from the date on which the grounds for bankruptcy arose. In the case of commercial companies, this responsibility does not lie with the company itself as an entity, but with the persons who represent it – most often the members of the management board. Regardless of the number of members of this body or the extent of their actual involvement in the company’s affairs, they have a statutory obligation to assess the financial situation and take appropriate legal steps. This applies to both the management boards of limited liability companies and joint-stock companies.

In some cases, this obligation may also apply to liquidators, partners managing the affairs of a partnership or attorneys acting on behalf of the debtor, provided that their role is managerial in nature. The legislator does not provide for exceptions based on subjective knowledge or internal division of competences – what counts is the actual performance of the functions of the body obliged to act. In practice, this means that formal responsibility also extends to persons who ‘formally’ sit on the management board but do not actually participate in decision-making. This is why legal awareness and ongoing supervision of the company’s financial situation is not only a matter of diligence – it is an obligation that must be accounted for.

Consequences of failing to file a petition on time

Failure to file for bankruptcy within the statutory time limit has multi-level legal consequences that may directly affect members of the management board. This is not only a formal risk, but also very real consequences – civil, criminal and public law. The most common form of liability is liability for damages to the company’s creditors. For example, if enforcement against the company proves ineffective, the members of the management board of a limited liability company are jointly and severally liable with all their personal assets for its liabilities, pursuant to Article 299 § 1 of the Commercial Companies Code. This means that a private home, salary or funds in a bank account may be subject to enforcement proceedings against a member of the management board, even if they were not the sole decision-maker.

At the same time, there is a risk of criminal liability. Pursuant to Article 586 of the Commercial Companies Code, anyone who, being a member of the management board of a commercial company, fails to file for bankruptcy within the prescribed time limit, is subject to a fine, restriction of liberty or imprisonment for up to one year. In practice, criminal proceedings are initiated in particular when creditors or the trustee in bankruptcy proceedings report a possible offence.

In addition, the court may prohibit a member of the management board from conducting business activity and performing functions in company bodies for a period of 1 to 10 years. This measure, provided for in Article 373 of the Bankruptcy Law, is applied when the debtor – or a person representing the debtor – has grossly neglected their obligations to file for bankruptcy, exposing creditors to loss.

Exceptions to the liability of management board members

Although bankruptcy and commercial law impose a clear obligation on management board members to act in the event of a company’s insolvency, liability for failure to do so is not always automatic. The regulations allow for situations in which it is possible to effectively avoid negative consequences. It is important to demonstrate that the person performing the management function is not at fault for failing to fulfil their obligation or that the deadline was met, e.g. by filing for bankruptcy or initiating restructuring proceedings in a timely manner.

Exemption from liability may also apply if a member of the management board was effectively excluded from the decision-making process – they did not have access to financial information, were effectively removed from the company’s affairs, and did not participate in its management despite having a formal mandate. In such cases, the courts analyse the circumstances individually, assessing whether the person concerned exercised due diligence. The corrective measures taken are also of significant importance: documented attempts at restructuring, negotiations with creditors or attempts to conclude an arrangement may speak in favour of the board member and limit the scope of their liability.

Practical tips for board members

Serving on the board of directors is not only about responsibility for the company’s strategy and development. It also involves the obligation to constantly monitor its financial situation. One of the most important preventive measures is systematic liquidity monitoring. This applies both to the ongoing settlement of liabilities and to analysing whether the company’s assets are sufficient to cover its debt. It is worth ensuring that internal reporting procedures are efficient. Regular cooperation with the accounting department and legal advisor is equally important, especially when the first signs of problems appear.

Every decision made during a period of deterioration in the company’s condition should be well documented. Minutes of board meetings, financial analyses, expert opinions and evidence of attempts to reach an agreement with creditors should be collected. Such documentation may be important in any court proceedings. It allows you to demonstrate that the management board acted with due diligence. It is also important to react quickly. When there is a real risk of insolvency, one should not wait. Delaying action increases the risk of personal consequences.

In many cases, restructuring proceedings may be an alternative to bankruptcy. They have less severe consequences and allow not only to protect the company, but also to limit the liability of the management board members. Therefore, it is worth acting when the company still has room for manoeuvre. Not when the possibilities are already exhausted.

How can RBBC Law Firm help?

As a law firm specialising in bankruptcy and restructuring proceedings, we help company management boards make decisions that not only comply with the law but also effectively protect their liability. We start by analysing the company’s situation – we determine whether and when insolvency arose, what the possible scenarios are and what the consequences may be.

We prepare a complete set of documents for the court, represent clients in proceedings and support them in their dealings with creditors, receivers or court supervisors. We also work with board members individually – we help them limit their liability, ensure that processes run smoothly and minimise the risk of personal consequences. The law provides the tools. RBBC helps you use them before they become an obligation.