Over the years, I’ve advised a lot of companies that were looking to make an investment in Poland. During this process, the investor team and I tend to discuss several recurring themes about doing business here. One of these “talks” is inevitably about a director’s duties and liabilities. Unfortunately, it often results from a call from a fretting board candidate who heard something about jail time and personal liability in Poland.
I’m not going to regale you with tales of how bad it can get for a director in Poland when it goes wrong. Search the internet if you want sensationalism. Keep reading if you want a practical take.
Before we talk about the risks, let’s be clear on the roles of the two types of boards in Poland: management and supervisory. The supervisory board is the classic board. Not all companies need a supervisory board, and its role focuses on oversight. The management board manages the company and represents it. To use English legal nomenclature, these are the “officers” of a company. It is to this latter group—the persons really running a company—that vast majority of the potential director’s liabilities apply.
The bare facts
I have a three page memorandum listing the claims, fines and prison terms that may be brought against a management board member of a limited liability company (Sp. z o.o.). If you read it without knowing anything else about doing business in Poland, you might be inclined to reconsider. Although the list is long, the liabilities can generally be grouped into three categories, and only one of them is a real concern if you are trying to be diligent about compliance.
The first group relates to corporate and accounting compliance. A management board member may be fined or worse for not keeping up-to-date corporate records and making proper and timely corporate and tax filings. Frankly speaking, I’ve seen a lot of companies get behind on their filings or keep sloppy corporate records. As long as they make an effort to put things right, a fine is rarely imposed.
The second group relates to insolvency. In other words, this is when a company’s liabilities exceed its assets. If you take nothing else from this article, be careful that your company does not become insolvent. In addition to various civil and criminal penalties, you, as a management board member, put your personal assets at risk if you fail to file for bankruptcy timely.
The third group relates to situations in which a director causes damage to a company through improper actions or failure to take action. It probably comes as no surprise that you should perform your duties diligently. If you do that, and make sure that your company stays solvent, Poland is not a scary place for directors. u
Judith Gliniecki is a partner in Wierzbowski Eversheds Poland