Draft Changes to the Tax Ordinance - Individual Tax InterpretationsLiability for the obligations of a limited liability company

"I am a partner in a company, we have outstanding liabilities to contractors, what are my risks?" - This is perhaps the most frequently asked question by clients in the context of companies ;) We will try to provide an answer to it in several steps.

AS A RULE ;)

Partners of a company are not liable with their own assets for the obligations of the company - end of story. The only risk they bear is that in the event of the company's insolvency, bankruptcy, or liquidation, they will not get back what they invested in it - simply because there will be nothing to reimburse from.

THERE ARE EXCEPTIONS

For the obligations of a limited liability company, those acting on behalf of the company (e.g., a partner representing the company) and all partners are jointly liable with the company, up to the amount of the unpaid contribution. In layman's terms - partners risk only up to the contribution agreed upon in the company's articles of association, and no one can demand coverage of the company's obligations from other private assets they possess. However, the situation is different regarding the liability for actions taken on behalf of the company in an organization - these are extremely rare (if at all) undertaken by persons other than members of the management board and proxies. At present, the registration time in the National Court Register (at least in the case of our clients ;) ) is a maximum of 2-3 weeks, so it's best to refrain from incurring obligations during this period.

BOARD MEMBERS' LIABILITY

The correctness of the economic policy and solvency in the company rests with the management board. Therefore, if the company fails to meet its obligations, the court will issue a judgment against it, but if the bailiff fails to enforce the claim, the company's creditor may sue a member of the management board and seek recovery of the claim from their entire assets.

To prevent this, a member of the management board should file for the bankruptcy of the company at the appropriate time. Such action will allow them to demonstrate that they have exercised due diligence and even if the creditors remain unsatisfied - their private assets will be safe. Contrary to some popular believes, the application for bankruptcy is not filed when the company is already in dire straits - the law provides for a specific, final deadline for this action.

The application for bankruptcy must be filed within 30 days from the day on which the basis for declaring bankruptcy arose.

The basis for declaring bankruptcy... "So when exactly?" - every person who still believes in the rationality and clarity of the law will ask ;) Unfortunately, the regulations do not indicate a specific moment that could be adopted as a uniform standard for each company and say - NOW, this is the moment, we act, or we'll all sink.

According to Article 11 of the Bankruptcy Law, a company is insolvent if it has lost the ability to settle its due monetary obligations - although again, pinpointing the exact moment can be extremely difficult, especially in a dynamic economic situation. From the bankruptcy law, two presumptions arise, providing a hint of "now."

According to the first one - a company is considered insolvent if it fails to settle its monetary obligations for a period exceeding 3 months. According to the second one - a company is considered insolvent if its obligations exceed the value of its assets, and this condition persists for a period of 24 months. Therefore, one should calculate the value of all monetary obligations of the company and the value of all assets of the company, at market prices.

But board members are usually not accountants - heck, they usually don't even have ongoing supervision over the accounting books, as these are in the hands of accountants. And here's the rub. Only full, committed cooperation with the accountant, ongoing contact and supervision guarantee not missing this right moment (should it, unfortunately, come) and thus securing the vital interests of all board members

That's why it's so important to entrust accounting services to a committed person who stands out and keeps their finger on the pulse. And that's why... we invite you to work with us ;)