Directors’ criminal liability for harming creditors and bankruptcy-related conduct
Chapter 12
In most jurisdictions, company directors are held responsible for “Antecedent Transactions”, among which a number of typical situations can result in director liability:
1) Preference transactions – Directors may incur personal liability for causing loss to creditors if they engage in a transaction that gives a creditor a preferential position over others in an insolvent liquidation (had the preference not taken place).
Polish law explicitly prohibits preferential transactions and imposes criminal sanctions for violating this prohibition.
Those who, in the event of impending insolvency or bankruptcy, unable to satisfy all creditors, pay or secure only some, thereby acting to the detriment of others, are subject to a fine, imprisonment for up to 2 years, or restriction of liberty. The offense under Article 302 § 1 of the Criminal Code consists of partially or completely satisfying a group of creditors to the detriment of others. The effectiveness or ineffectiveness of enforcement proceedings for these obligations and the criteria used by the accused in regulating such obligations (why they decided to give preference to certain creditors) are entirely irrelevant to the existence of this offense [judgment of the Katowice Court of Appeal – II Criminal Department, dated December 2, 2021, case no. II AKa 238/21].
Other types of Antecedent Transactions in different legal systems might include:
2) Transactions at an undervalue – Directors may be required to provide compensation to the company and its creditors for any losses incurred due to the company engaging in a transaction at an undervalue. A transaction at an undervalue occurs when the company either gifts an asset to a third party or receives less than the reasonable market value for it.
3) Transactions defrauding creditors – Directors may be obligated to compensate the company and its creditors for any losses sustained as a result of assets being transferred with the purpose of placing those assets out of reach of creditors.
In Poland, we have a slightly different concept in this regard. Without explicitly distinguishing “Transactions at an undervalue” and “Transactions defrauding creditors,” we have specified four other offenses to the detriment of creditors:
1) In the event of impending insolvency or bankruptcy, anyone who hinders or diminishes the satisfaction of their creditor by removing, concealing, disposing of, giving away, destroying, actually or apparently encumbering, or damaging components of their assets, is subject to a sentence of imprisonment for up to 3 years.
2) In order to obstruct the enforcement of a court judgment or another state authority’s decision, anyone who hinders or diminishes the satisfaction of their creditor by removing, concealing, disposing of, giving away, destroying, actually or apparently encumbering, or damaging components of their assets that have been seized or are at risk of seizure, or who removes seizure marks, is subject to a sentence of imprisonment ranging from 3 months to 5 years.
3) A debtor who obstructs or limits the satisfaction of multiple creditors by creating a new business entity based on legal provisions and transferring components of their assets to it, is subject to a sentence of imprisonment ranging from 3 months to 5 years. Additionally, the same penalty applies to a debtor who leads to their own bankruptcy or insolvency while indebted to multiple creditors.
4) A debtor who recklessly leads to their own bankruptcy or insolvency, especially by squandering components of their assets, incurring obligations, or engaging in transactions blatantly contradicting the principles of management, is subject to a fine, restriction of liberty, or imprisonment for up to 2 years.
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.
