Exoneration of a management board member from joint and several liability: the implications for businesses of a judgment of the Provincial Administrative Court in Wroclaw

19 February 2024 | Knowledge, News, Tax Focus, The Right Focus

Polish courts frequently resolve disputes concerning the liability of members of a company’s management board for tax arrears. These cases are extremely complex, as they require consideration of both tax and bankruptcy law. The courts have to take into account various factors such as financial management, timeliness of filing documents and possible restructuring measures, as the issue at stake is the liability of board members for the company’s tax debts.

In this context, it is worth considering the recent judgment of the Provincial Administrative Court[1] in Wroclaw (Case No. I SA/Wr 337/22) [2],  which highlighted a certain important issue relating to the joint and several liability of management board members under Article 116 of the General Tax Code[3].

Management board members are jointly and severally liable for the tax arrears of a limited liability company

A company had corporate income tax arrears. The first-instance tax authority found that the management board had not filed for bankruptcy on time and had not provided evidence that any restructuring measures or actions related to the arrangement approval procedure had then been taken.

It also found that there were grounds for declaring bankruptcy at the time of the management board member’s term of office, however the manager failed to provide any documents explaining the reasons for his failure to do so. Therefore, the tax authority decided that the company’s management board member was jointly and severally liable for the company’s tax debt.

However, it is worth pointing out a key element of the case at hand. At the time of the proceedings, the company had only one creditor, the Tax Office.

One or more creditors – what is the basis for the joint and several liability of management board members

In order to understand the nature of the problem, it is necessary to refer to Article 116 § 1 of the General Tax Code, which states that “the members of the management board of a limited liability company are jointly and severally liable with all their assets for the tax arrears of the company […] if the enforcement of the company’s assets proved to be wholly or partially ineffective and no management board member proved in due time that a bankruptcy petition had been filed or that reorganisation proceedings had been initiated at the time.”

The legislator thus refers us to legal norms that go beyond the tax sphere. The part of the provision that deals with the situation in which a management board member has failed to prove the filing of a bankruptcy petition in due time is particularly relevant here.

This is because, in accordance with Article 2(1) of the Bankruptcy Law[4], “bankruptcy proceedings shall be conducted in such a way as to satisfy creditors’ claims to the greatest extent possible”.

The key word here is the term “creditors”, which is used in the plural.

Therefore, at least two creditors are required for the opening of bankruptcy proceedings. This assumption is also confirmed by case law, which indicates that bankruptcy proceedings must be a collective procedure that serves the interests of at least two creditors.

How to avoid joint and several liability for a company’s tax debts

In order for a management board member to avoid joint and several liability under Article 116 of the General Tax Code, the company must file for bankruptcy.

However, if the company has only one creditor, this is not possible. And even if the company were to file such a petition, it would be rejected.

It is therefore clear that there is a legal loophole in this respect.

On the one hand, tax legislation provides for the possibility of being released from joint and several liability. However, if a management board member tries to exercise this right, their bankruptcy petition may be rejected as it does not meet the formal requirements.

It is therefore positive that the PAC sided with the management board member and ruled that he was not obliged to file for bankruptcy.

Importantly, the court held that such action could not lead to liability for the company’s debts, as the incompleteness of the legal system should not lead to tax liability.

However, it is important to remember that every tax case is different and Polish case law is not a binding source of law.

And although another court may take these judgments into account in a subsequent case, it is not obliged to do so. So it’s always worthwhile consulting expert advisers, to help you navigate the maze of options at such a critical stage of the business life cycle.

Questions? Contact us

Jan Janukowicz

 

[1] Provincial Administrative Court, hereinafter: PAC.

[2] Judgment of the PAC in Wroclaw of 21 December 2023, I SA/Wr 337/22, LEX no. 3667578.

[3] General Tax Code Act of 29 August 1997 (consolidated text in: Journal of Laws of 2023, item 2383, as amended), hereinafter: General Tax Code.

[4] Bankruptcy Law Act of 28 February 2003 (consolidated text in: Journal of Laws of 2022, item 1520, as amended) hereinafter: Bankruptcy Law.

Latest Knowledge

Length of service now includes periods of self-employment

The length of service no longer depends solely on work carried out under a contract of employment. The amendment to the Labour Code introduces significant changes, as work carried out under civil law contracts or as part of business activity will now also be included when calculating service, which affects employees’ rights. What will this mean for employees and employers?

Banking sector overview | Banking today and tomorrow | February 2026

The Polish banking sector is undergoing intense reshuffling on a scale not seen for years. Large banks are changing owners, foreign players are shifting their strategies and new investors are entering the market. The question is whether these are just temporary shifts in capital or the beginning of lasting change in the industry’s balance of power.

31 January. Don’t forget about the DAC7 Directive

The deadline for meeting the obligations under the DAC7 directive and the Polish regulations implementing it is fast approaching. Online platform operators must fulfil their reporting obligations by 31 January 2026 at the latest with regard to 2025 data. For many, this is the final opportunity not only to prepare the required information, but also to verify whether DAC7 obligations apply to them and, if so, to what extent.

The New Consumer Credit Act – extensive regulation with a broad market impact

In 2025, the Polish financial market entered another phase of adjustments to EU legislation. The draft new Consumer Credit Act implementing the CCD2 Directive, alongside the regulations on distance financial services, represents one of the most comprehensive attempts to standardise the rules for providing finance to consumers. The changes are so extensive that they cover all stages, from advertising and customer acquisition to the assessment of creditworthiness, the structure of agreements, the scope of the lender’s liability, withdrawal rules and the detailed organisation of remote sales.

Energy Radar 2026: Your roadmap to energy transition

Energy is no longer the exclusive domain of engineers and politicians; it is becoming the foundation of the business strategy of any company that wants to remain competitive. And 2026 will see a multitude of legislative changes that will fundamentally alter the current approach to the rules for grid connection, energy trading and reporting obligations.

Banking sector overview | Banking today and tomorrow | January 2026

On 1 January, new regulations came into force that increased the income tax rate paid by banks. The rate will be 30% in 2026. However, entities starting their business, credit and savings unions (SKOKs), small entities, and banks undergoing restructuring will pay less.

2025 in the banking sector: legal and tax changes, and strategic challenges

The Polish banking sector underwent profound reforms and new regulatory obligations in 2025. Despite achieving record financial results, banks were faced with mounting tax pressures and changes in benchmarks, as well as the implementation of EU regulations concerning operational security, anti-money laundering, digital payments, the use of artificial intelligence, environmental issues, ESG reporting and green transformation. Against this backdrop, we also observed market consolidation, partly driven by growing competition from new banks. In this article, we explore how these factors have transformed the Polish financial institution market.

Contact us:

Jan Janukowicz

Jan Janukowicz

Advocate Trainee / Associate / Tax Law

+48 736 272 203

j.janukowicz@kochanski.pl

Wojciech Śliż

Wojciech Śliż

Tax Advisor / Partner / Tax Law

+48 539 110 037

w.sliz@kochanski.pl