Pursuant to Art. 293 of the Code of Commercial Companies Act of 15 September 2000 (Journal of Laws of 2013, item 1030, as amended, hereinafter: the “CCC”), members of the management board of a limited liability company are liable to the company for any damage caused by acts or omissions in breach of the law or the provisions of the articles of association, unless they are not at fault. Furthermore, they must exercise diligence entailed in the professional nature of their activity while performing their duties.
It is accepted in case-law and in the doctrine that the liability of board members for damage caused to the company is contractual in nature (ex contractu) and is triggered only for damage caused by unlawful acts or omissions on the part of a board member, i.e. such action or omission that is in breach of the law or the provisions of the articles of association. It is also noted in the case law and by legal writers that board members may discharge themselves of liability by demonstrating the absence of intentional fault, and hence by demonstrating that their acts or omissions occurred with due diligence exercised.
It is also uniformly accepted that a breach of the obligation to exercise due diligence may not provide, as such, sufficient grounds for holding a board member liable. It has been recognised so far that any action or omission by a management board member would need to breach a specific provision of the law or a contractual provision. In its judgement of 18 August 2011 (case file no. O ACa 54/11), the Court of Appeals in Warsaw held that the action alleged to have breached Art. 201 of the CCC may not be the basis for the liability of a board member. This is because that provision does not define clearly the method and rules for representing the company and managing its affairs, and consequently no obligation to correctly manage the affairs of the company may be inferred from it. Based on these rules of liability, it was possible to formulate the view that members of the management board of a company are not liable – insofar as they act within the law and do not breach the articles of association – for any actions that involve excessive business risk.
The judgment of the Supreme Court of 24 July 2014, case no. II CSK 627/13, appears to have made that position obsolete. In the said judgment, the Supreme Court, while admitting that a breach of the obligation to exercise due diligence is not as such sufficient basis for holding a management board member liable, found nevertheless that Art. 201 § 1 of the CCC (“The management board shall manage the affairs of the company and represent the company.”) may be construed to imply the obligation of board members to manage affairs of the company to the interest of the same. According to the Supreme Court, culpable actions by board members involving excessive business risks are contrary to the interest of the company. As such, they infringe the general directive laid down in Art. 201 § 1 of the CCC and provide grounds for the liability of a board member under Art. 293 § 1 of the CCC.
This view of the Supreme Court extends the liability of management board members towards the companies represented by them and makes it possible for board members to be held liable for decisions that involve excessive business risk. It is clear that any commercial decision is in practice subject to business risk. Yet, no provision of the law defines the limit of acceptable business risk. Hence, the decision of the Supreme Court may open the door to discretion in holding management board members liable for managing company affairs, by introducing imprecise and unclear criteria of liability.
The above-described judgment of the Supreme Court of 24 July 2014 may be considered controversial from a practical point of view and induce company managers to adopt a very conservative approach while making business decisions. Therefore, it should be expected that the view in question is merely incidental and not likely to establish any new consistent case-law.