Under general principles of tax law the taxpayer is
solely liable for incurred arrears. However, there are
important exceptions to this rule. One of the most
marked exceptions is the joint liability of board
members with all their assets for the tax arrears of
limited liability and joint stock companies, even
prior to incorporation. However, according to the
Article 116 of the Tax Ordinance Act of 29
November 1997 (the unified text Journal of Laws
2005, No. 8, item. 60, as amended) this liability is
only triggered when the execution against the
company’s assets proved to be fully or partially
ineffective.
In its decision dated December 8, 2008 (court file no
II FPS 6/08), the Supreme Administrative Court
interpreted the criteria for the finding of insolvency
referred to in the Article 116 § 1 of the Tax
Ordinance Act. In setting the standard for application
the court analyzed the Article 299 of the Code of
Commercial Companies (hereinafter the “CCC”).
The CCC provides that any evidence which shows
that the company has no assets to satisfy creditor is
admissible regardless of the initiation of enforcement
proceedings. This extremely lax evidentiary standard
should not be applied in assigning joint liability to
board members under the Tax Ordinance Act.
Therefore, the court interpreted the Tax Ordinance
Act to require that such findings can be made after
the enforcement proceedings have been concluded.
However, the court retained the application of low
evidentiary threshold which allows any legally
admissible evidence to be used in proving the
insufficiency of funds.
Fortunately, there are two methods under which
board member can waive liability under the Article
116 of the Tax Ordinance Act. Where the board
member can demonstrate that (i) bankruptcy or
bankruptcy prevention proceeding have been
initiated in a timely manner or (ii) where the member
did not negligently or intentionally prevent
bankruptcy initiation or composition proceedings.
Another route for a board member to avoid
secondary liability is if the member reports company
property that is sufficient to satisfy a substantial
portion of the debt. Importantly, liability of board
members includes taxes incurred within the scope of
the members’ duties during the time when they were
actively on the board.
It is worth mention that a September 21, 2010
judgment of the regional administrative court in
Warsaw (court file no III SA / Wa 510/10), affirmed
by the Supreme Administrative Court decision on
December 20, 2011 (court file no I FSK 192/11),
held that board member liability for back owed taxes
and interest cannot be interpreted without regard to
the relevant provisions of bankruptcy law and the
CCC. The wording of these provisions indicates that
the interest on debts due for the period preceding the declaration of bankruptcy can be paid from the
bankrupt company estate. It is also important to note
that not only are the company assets liquidated but
also the company is dissolved and deleted from the
national registry. Consequently, after the conclusion
of bankruptcy proceedings, which did not satisfy tax
creditors and where the company lost its legal
existence, the company itself will not be liable for
the unpaid tax arrears, including interest calculated
after the bankruptcy date. Also the board member of
the bankrupt company cannot be liable for such
interest on backed taxes. Therefore, as the
administrative courts have highlighted, in the light of
the aforementioned provisions a board member
cannot incur a greater liability for the interest on
backed taxes than the company itself would have
suffered.
MILLER, CANFIELD,
W. BABICKI, A. CHEŁCHOWSKI I WSPÓLNICY SP.K.
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81-366 Gdynia
Tel. +48 58 782-0050
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Tel. +48 22 447-4300
Fax +48 22 447-4301
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Tel. +48 71 337-6700
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Disclaimer: This publication has been prepared for clients and professional associates of Miller Canfield. It is intended to provide only a summary of certain recent legal
developments of selected areas of law. For this reason the information contained in this publication should not form the basis of any decision as to a particular course of
action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in individual cases. The services of a competent professional adviser
should be obtained in each instance so that the applicability of the relevant legislation or other legal development to the particular facts can be verified.