Liability of management board members of a limited liability company – What is worth knowing?

This article answers the following questions:

• What are the legal bases governing the liability of persons serving as management board members in a limited liability company?
• What consequences may be imposed on management board members who fail to fulfil their statutory obligations?
• How do the regulations address the liability of a shareholder of a limited liability company who is also a member of its management board?
• How can one responsibly exercise the role of a management board member in a limited liability company and protect oneself against potential civil and criminal liability?

Individuals serving as members of the management board of a limited liability company should be aware that the role involves not only the right to represent the company, but also significant duties and the risk of incurring civil and criminal liability. As indicated in our previous article on the management board of a limited liability company, Article 299 of the Polish Commercial Companies Code (Pol. KSH) plays a key role, although it is not the only provision governing this matter. For this reason, corporate advisory specialists always take a broader view when analysing issues related to liability. What do experts pay attention to and what should you keep in mind?

Types of liability of management board members

When analysing the consequences that may be imposed on management board members of a Polish limited liability company, it is essential to have a clear understanding of the legal acts governing (first) the scope of their duties and (second) the scope of liability associated with those duties.

Civil liability towards the company and its shareholders

Management board members are liable for any damage they cause through actions or omissions that are unlawful or contrary to the company’s articles of association. The most relevant provisions are Articles 291–293 of the Polish Commercial Companies Code:

• Article 291 KSH – liability towards creditors for providing false data in registration statements,
• Article 292 KSH – liability for damage caused during the formation of the company,
• Article 293(1) KSH – liability towards the company for breach of law or the articles of association.

Additionally, creditors of the company may seek compensation for the damage caused by management board members under general rules of the Polish Civil Code, as expressly stated in Article 300 KSH.

Liability of management board members for the company’s obligations – Article 299 KSH

Under Article 299 of the Commercial Companies Code, management board members – both current and former – are jointly and severally liable for the company’s obligations if enforcement against the company proves ineffective. This liability covers the principal debt, interest, and court and enforcement costs. In the event of a management board member’s death, the liability passes to their heirs.

A management board member may avoid liability if they prove that:

• they filed a petition for declaration of bankruptcy in due time,
• restructuring proceedings were opened or a composition was approved,
• they fulfilled their duties and were not at fault for the failure to file for bankruptcy,
• their actions as a board member did not result in damage to the creditor.

When analysing liability under Article 299 KSH, it is important to remember that:

• liability covers the period from the moment of appointment to the function (not from its registration),
• no liability may be imposed for obligations arising after the expiry of a board member’s mandate,
• liability applies only to monetary obligations, regardless of their source (contract, tort, unjust enrichment),
• enforcement must be ineffective against the entirety of the company’s assets, and it is the creditor’s burden to prove such ineffectiveness,
• board members who are also shareholders are subject to exactly the same rules.

The purpose of Article 299 KSH is to protect the limited liability company, its shareholders, and creditors against improper management of the company's affairs by members of its management board.

This irregularity in the conduct of business focuses on the risk of harming (not satisfying) creditors by preventing effective enforcement against the company's assets. This provision therefore allows management board members who served during the period in which the circumstances necessary to file a bankruptcy petition or initiate restructuring proceedings arose to be held accountable for failing to properly conduct the company's affairs.

Liability of a shareholder who also serves as a management board member

Generally, shareholders of a limited liability company do not bear liability for its obligations – their risk is limited to the amount of their contributions. However, this changes when a shareholder becomes a management board member. In such cases, they become liable under the same rules as other board members, including liability under Article 299 KSH.

Additionally, a shareholder may incur liability if they:

• provide guarantees or other security for company obligations,
• cause damage through a tortious act,
• abuse the legal form of the company (which may lead to so‑called “piercing the corporate veil”).

Liability of management board members for public‑law obligations

Serving as a management board member also involves exposure to liability for public‑law obligations, particularly taxes and social security contributions. The legal basis is Article 116 of the Tax Ordinance, which imposes liability on board members with their personal assets if enforcement against the company is ineffective.

This liability covers not only tax arrears but also:

• fees and non‑tax receivables owed to the state budget and local governments,
• stamp duties and local taxes,
• social security contributions, Labour Fund, Guaranteed Employee Benefits Fund, Bridging Pensions Fund, and health insurance contributions.

A management board member becomes liable if:

• enforcement against the company’s assets is ineffective,
• the arrears arose during their term of office,
• they cannot prove that:
  • a bankruptcy petition or restructuring motion was filed in due time,
  • they were not at fault for the failure to file for bankruptcy,
  • they indicated company assets allowing significant satisfaction of the arrears.

It is crucial to note that proving the absence of damage does not release a board member from liability. Timely filing of a bankruptcy or restructuring petition remains the most important protective measure.

Criminal liability of management board members under the Commercial Companies Code

The Commercial Companies Code also provides a range of criminal sanctions for management board members who breach their obligations. These penalties typically apply in cases of failure to perform essential statutory actions or intentionally misleading corporate bodies or state institutions.

Key examples include:

• failure to file a bankruptcy petition (Article 586 KSH) – punishable by a fine, restriction of liberty, or imprisonment of up to one year,
• providing false data (Article 587 KSH) – imprisonment of up to two years,
• breach of obligations related to share transfer procedures and corporate documentation (Articles 588–589 KSH) – punishable by a fine or imprisonment of up to six months,
• issuing false certificates and unlawful voting (Articles 590–591 KSH) – punishable by a fine, restriction of liberty, or imprisonment of up to one year,
• organisational offences (Articles 594–595 KSH) – fines up to 20,000 PLN for failure to maintain shareholder lists, failure to keep share registers, failure to convene meetings, or improper marking of company documents,
• breach of the prohibition on promotion or advertising of company shares (Articles 595¹–595² KSH) – punishable by a fine, restriction of liberty, or imprisonment of up to six months.

Criminal liability thus covers both serious violations and more technical breaches, such as failure to maintain a share register. Knowledge of and compliance with statutory obligations – and transparent action – are therefore crucial to avoiding the risk of criminal liability.

How can management board members protect themselves against liability?

As can be seen, serving on the board of a limited liability company involves a real risk of personal liability for its obligations. Each management board member must therefore be aware that improper management of the company's affairs may result in serious financial consequences for them, and it is therefore crucial to act with due diligence – both during the ongoing management of the company and in crisis situations.

How to mitigate the risk of liability?

Actions that members of the management board of a limited liability company should take to minimise the risk of fines, legal consequences, or liability for the company's obligations include:

• maintaining accurate documentation – maintaining complete corporate and financial documentation (and ensuring it is created in compliance with Polish regulations) is essential, especially in the case of formalities requiring recording in relevant national registers,
• timely fulfilment of statutory obligations – meeting the deadlines imposed by the regulations is particularly important in the case of filing bankruptcy or restructuring applications,
• purchasing appropriate insurance – insurance companies offer protection against claims related to performing duties, which is a worthwhile solution if there are concerns about the company's liquidity,
• maintaining ethics and transparency principles – making decisions in accordance with the law and due diligence principles allows management board members to more easily defend themselves against potential actions taken against them by creditors or Polish state authorities.

Prudent management and swift reaction to early signs of insolvency are the best protection against personal liability. Management board members should therefore consider conducting an internal audit and implementing control procedures for early detection of irregularities, as well as using professional legal advisory services to ensure full compliance of corporate documentation with Polish regulations.

Liability of the management board for company obligations should not be underestimated

Serving as a management board member in a limited liability company comes with a responsibility that goes far beyond day-to-day decision-making. The risk of personal liability for management board members in connection with their duties is real, especially in the context of Articles 291-299 of the Commercial Companies Code.

Importantly, this liability may apply not only to current but also former management board members, and in certain cases, also to their heirs.

The best protection is conscious management: ongoing monitoring of the company’s financial standing, timely reaction to signs of insolvency, and the support of professional advisers. Such an approach not only minimises risk but also enables safe and responsible business operations. 

We encourage you to contact us and see how our experts support companies operating in Poland with ad hoc legal services and formalities related to the sale or redemption of shares, preparation of contracts, and development of resolutions and minutes of company bodies.