Statute of limitations as a lifeline for statutors

Liability of members of elected bodies – a powerful tool for creditors

In other words: it is not enough that the company owes money. Nor is it enough that the board member acted wrongly.

For a creditor to succeed, they must prove:

1. that the member of the elected body breached their duties in the performance of office (e.g., failed to keep accounting records, distributed advances without performance, etc.),

2. caused damage to the company itself through this breach,

3. that they have not compensated this damage,

4. and that the creditor cannot obtain performance directly from the company.

This in itself is no easy task. But there is another crucial aspect that can affect the success of a creditor's lawsuit. Namely, the statute of limitations, which, given the nature of the liability of a member of a statutory body, has its own specific features described below.

Statute of limitations: strong protection for former directors

The Supreme Court of the Czech Republic, in a published decision, emphasized that a creditor's claim under Section 159(3) of the Czech Civil Code will not stand if the company's right to damages against the body member is already time-barred.

This is so even if the creditor's own claim against the company does not have to be time-barred.

In other words: if the company "slept" on its rights against the director and did not claim damages in time, the creditor cannot "catch up" for it.

This is no formality. The limitation periods are set relatively strictly: a three-year subjective period and a ten-year (or fifteen-year) objective period.

According to the court, it is not possible to force former board members to keep all evidence and prepare for potential proceedings years after leaving office. That would be contrary to legal certainty.

Specifically, the Supreme Court stated:

„In the case at hand, the concept of limitation serves (among other things) to protect a member of the board of directors from an unlimited obligation, both in terms of time and content, to retain documents and other evidence by which they can (must) prove that, in the performance of their office, they made (each individual) business decision in accordance with the business judgment rule. In other words, the requirement that a board member should be constantly prepared, in relation to all debts of the company (regardless of whether they were known to them or not), to defend their business decisions made in the performance of office and to prove that they meet the standard of due managerial care, even though the limitation period for the company to assert its right to damages has already expired, is contrary to the meaning and purpose of the statutory regulation of limitation.“

What does this mean in practice?

For members of statutory bodies:
The judgment brings essential reassurance – you cannot be sued "forever". If the company does not claim damages against you in time, neither can the creditors. You have the right to defend yourself with the statute of limitations defense, even in disputes that did not directly concern you.

For creditors:
If you want to recover your debt through a company director, you must act quickly. It is not enough that you know about the debt – you must be prepared to prove the entire chain of liability and, in addition, make sure that the company's own claim for damages has not become time-barred.

Conclusion: liability yes, but with boundaries

The decision of the Supreme Court sets boundaries for asserting liability under Section 159(3) of the Czech Civil Code. Creditors have a powerful tool in their hands, but only if they use it in time and correctly. On the other hand, directors receive important protection – the statute of limitations as a legitimate defense against personal liability for corporate debts.

Do you need advice on how to assert claims against a director in a timely and correct manner – or, conversely, how to defend yourself as a former member of a company's body? Get in touch with our Czech legal team. We help companies and individuals defend their rights clearly, effectively, and with perspective.