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 is a Polish attorney at law (radca prawny), the founder and managing partner of Kancelaria Prawna Skarbiec (Skarbiec Law Firm), which has operated continuously since 2006.
The law is equal for everyone, but the parties rarely are: on one side stands an organization with time, money, and lawyers, on the other a person with one business, one nest egg, and one life.
Clients rarely come to him with a legal problem. They come with a problem that also has a legal side: an audit that began with a single invoice, money entrusted to someone who has disappeared, a company that has to be passed on before it is too late. Most such matters are decided long before the first letter is written, in decisions made without asking and in deadlines nobody remembered. So he begins by asking how the client got here, not what the client should have done.
He advises entrepreneurs and families from more than a dozen countries, including those whose accounts the tax office has just seized and who do not know what to do tomorrow morning. He defends them in tax audits, customs and fiscal inspections, disputes with the tax authorities, and criminal tax proceedings. He represents victims of investment fraud and Ponzi schemes. He helps families set up family foundations and plan succession, so that a life’s work outlasts a single generation.
Not every case can be won. Every case can be run so that the client knows where they stand. Since 2006 he has represented the victims in the WGI case (Warszawska Grupa Inwestycyjna, the Warsaw Investment Group), one of the longest criminal cases in the history of the Polish financial market, because some things must not be left half finished, even when they take two decades. In the case of the collapsed cryptocurrency exchange Zonda (Zondacrypto, operated by BB Trade Estonia OÜ), he represents several hundred victims in the criminal investigation conducted by Poland’s National Prosecutor’s Office and in the Estonian bankruptcy proceedings.
Kancelaria Prawna Skarbiec is listed in the rankings of Poland’s largest tax advisory firms published by Dziennik Gazeta Prawna and Rzeczpospolita, and it is a four-time recipient (2015 to 2018) of the European Medal awarded by the Business Centre Club and the European Economic and Social Committee. Robert Nogacki publishes regularly, in the press and on the firm’s website, for people who have a problem rather than a law degree, because a legal opinion the client cannot understand protects only the lawyer.
He believes that the best legal advice is the kind that means the client never has to appear in court.
