When Is a Company Insolvent under Polish Law, and When Does the 30-Day Bankruptcy Deadline Start?
This article is a chapter of the ebook “Shielding Directors: A Practical Guide for Foreign Directors of Polish Companies” — see the full table of contents or download the complete ebook (PDF).
Everything in this guide converges on a single factual question: when did the company become insolvent? From that date run thirty days to file (Article 21(1) of the Bankruptcy Law; until the end of 2015 it was a brutal fourteen, and conduct from before 1 January 2016 is judged under the old rules), and every member of the management board bears the filing duty individually, regardless of joint-representation rules. Indeed, each member is empowered to file alone, precisely so that no one can hide behind a co-signature requirement.
The two insolvency tests under Article 11 of the Bankruptcy Law
Polish law, like the German law from which the architecture descends, recognises two independent gateways to insolvency.
Loss of liquidity (Article 11(1)). The debtor is insolvent upon losing the capacity to perform its due pecuniary obligations. Note the noun: capacity. The test is not a missed payment but a lost ability. A statutory presumption assists creditors: a delay exceeding three months in performing pecuniary obligations presumes lost capacity. Only pecuniary obligations count; a developer’s failure to deliver apartments, however scandalous, is not in itself a bankruptcy ground (it was, before 2009; no longer).
Over-indebtedness (Article 11(2)). A legal person is insolvent also when its pecuniary obligations exceed the value of its assets and this state persists for more than twenty-four months, even if it pays everything on time. The calculation has its own grammar: future and conditional obligations are excluded, as are shareholder loans and similar intra-group financing (the better view excludes all shareholder loans from the comparison, since there is no ratio legis for forcing a company into bankruptcy on account of debt that ranks last anyway); assets outside the future bankruptcy estate do not count; and a balance-sheet presumption applies. Because the company’s filed financial statements are public and binding in this assessment, boards should treat the annual accounts as a liability document, not an accounting formality. The 24-month runway gives the over-indebtedness limb a long fuse; in practice it is the liquidity limb that detonates.
Two safety valves: the court may dismiss a petition where the balance-sheet test is met but no near-term threat to paying obligations exists (Article 11(6)); and the court will dismiss a creditor’s petition where the debtor shows the claim is wholly disputed and the dispute predates the petition, a shield against bankruptcy petitions deployed as debt-collection artillery. A third dismissal ground, assets insufficient even for the costs of the proceedings, closes the courthouse door but does not reopen the director’s exposure if the petition was timely and proper.
Formal, not moral
For the declaration of bankruptcy itself, the cause of insolvency and the timing of the petition are irrelevant; the proceeding protects creditors, full stop. The cause and the timing become legally decisive elsewhere, in the liability provisions this guide is about. Polish law thus separates, with some elegance, the questions “should this company be wound up?” and “who pays for the delay?” The foreign director lives in the second question.
The case law on timing: guidance from the oracle
Given that everything turns on the trigger date, one would expect the courts to have furnished a clear and precise definition of when the filing clock starts. The Supreme Court has indeed furnished a series of indications. Their validity is not in doubt; their clarity is another matter, formulated in a manner of which the oracle at Delphi need not have been ashamed. The canonical four:
- A brief halt in payments due to transient difficulties is not a bankruptcy ground; insolvency arises only when the debtor, for want of means, fails for an extended period to perform the predominant part of its obligations (Supreme Court, 19 January 2011, V CSK 211/10).
- One must not schematically assume that every delay, even a single one, triggers insolvency requiring a petition (Provincial Administrative Court in Warsaw, 17 December 2020, III SA/Wa 301/20).
- Yet the cessation of performing due obligations gives rise to the filing duty even if assets still exceed debts, the debtor’s remedy being to sell assets or borrow (Supreme Court, 8 January 2013, III KK 117/12).
- And insolvency arises not only when the debtor lacks funds but also when it fails to perform for other reasons (Supreme Administrative Court, 6 March 2018, II FSK 2173/17).
To which add a fifth: non-payment of even a single creditor holding a substantial claim can constitute insolvency (Provincial Administrative Court in Gorzów Wielkopolski, 12 May 2020, I SA/Go 688/19).
The temporary-difficulties trap
Judgment V CSK 211/10 deserves a closer look, because it contains, quite unintentionally, a rather dark joke at the board’s expense. The holding sounds merciful: if the difficulties are merely temporary, there is no insolvency, no filing duty, no clock, no personal liability. Where is the humour? In the tense. Whether difficulties were temporary can be determined only ex post, with the benefit of hindsight, at the precise moment when it is too late to protect the board by filing on time. The Supreme Court presumably intended to throw boards a lifeline; what it handed the drowning was a razor blade to cling to. A typical board will fight for the company, will read its own optimism as evidence the difficulties are temporary, and will find in V CSK 211/10 the doctrinal permission to wait. When that reading is finally exhausted, the deadline is computed not from the day the difficulties ceased to be temporary, but from the original day the debtor stopped performing. The merciful judgment, followed in good faith, manufactures the very liability it appeared to forestall.
The operational conclusion is the one theme of this guide that admits no nuance: when in doubt, the safe error is filing early. The costs of a premature petition are real but bounded, a dismissed petition, some reputational noise, perhaps a dispute with shareholders. The costs of a late one are the subject of the chapters on civil and criminal liability. Boards that institutionalise the question, a standing monthly solvency review against both tests, minuted, with advice sought the first month either test flickers, convert an unanswerable judgment call into an answerable routine. The protection chapter provides the checklist.
Read the Full Guide
This chapter is part of the ebook “Shielding Directors: Navigating Personal Liability in Times of Financial Turmoil and Insolvency — A Practical Guide for Foreign Directors of Polish Companies.”
This article is general information, not legal advice. © Kancelaria Prawna Skarbiec
Robert Nogacki – licensed legal counsel (radca prawny, WA-9026), Founder of Kancelaria Prawna Skarbiec.
There are lawyers who practice law. And there are those who deal with problems for which the law has no ready answer. For over twenty years, Kancelaria Skarbiec has worked at the intersection of tax law, corporate structures, and the deeply human reluctance to give the state more than the state is owed. We advise entrepreneurs from over a dozen countries – from those on the Forbes list to those whose bank account was just seized by the tax authority and who do not know what to do tomorrow morning.
One of the most frequently cited experts on tax law in Polish media – he writes for Rzeczpospolita, Dziennik Gazeta Prawna, and Parkiet not because it looks good on a résumé, but because certain things cannot be explained in a court filing and someone needs to say them out loud. Author of AI Decoding Satoshi Nakamoto: Artificial Intelligence on the Trail of Bitcoin’s Creator. Co-author of the award-winning book Bezpieczeństwo współczesnej firmy (Security of a Modern Company).
Kancelaria Skarbiec holds top positions in the tax law firm rankings of Dziennik Gazeta Prawna. Four-time winner of the European Medal, recipient of the title International Tax Planning Law Firm of the Year in Poland.
He specializes in tax disputes with fiscal authorities, international tax planning, crypto-asset regulation, and asset protection. Since 2006, he has led the WGI case – one of the longest-running criminal proceedings in the history of the Polish financial market – because there are things you do not leave half-done, even if they take two decades. He believes the law is too serious to be treated only seriously – and that the best legal advice is the kind that ensures the client never has to stand before a court.
