Are the managing directors liable for the company's debts?

Sometimes yes. For it seems that the days of some statutory body members being just a number are coming to an end.

This article was written in 2014. If you are looking for the latest information on this topic, please contact us at office@arws.cz or by phone on +420 245 007 740. We will be happy to advise you.

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Author of article: ARROWS (JUDr. Jakub Dohnal, Ph.D., LL.M., office@arws.cz, +420 245 007 740)

For example, see Section 159(1) of the new Civil Code. According to it, by assuming the office, the statutory officer undertakes to perform it with the necessary loyalty and with the necessary knowledge and care. This is not so new. What is new, however, is the establishment of a rebuttable legal presumption that a person who is not capable of exercising such care, although he must have discovered this when accepting the office or when performing it, and who does not draw the consequences for himself, is acting negligently. The logic of the matter then follows that he who acts negligently is liable for damages.

It will therefore be important for you to consider whether you are really fit for the position, which will be assessed with reference to the company's field or business. But that is not all. The new Civil Code further provides (§ 159(3)) that if a statutory body (elected body) has not compensated a legal entity for damage caused by a breach of duty in the performance of its duties, although it was obliged to compensate the damage, it is liable to the creditor of the legal entity for its debt. He shall be liable to the extent to which he has failed to compensate for the damage, unless the creditor is unable to enforce performance against the legal person. In practice, this means that a managing director who does not devote himself properly to his duties may find himself liable for the company's debt without having previously undertaken to do so in writing. Effective advice is an effective defence.