The new rules for exempting legal persons from the obligation to bear judicial costs conflict with the substance of the commercial company as a separate entity of rights and obligations.
one the amendments to the current comprehensive revision of the civil procedure are modifying the rules on the dismissal of legal persons from judicial costs.
The amendment provides for the addition of section 2 to Article 103 Law on Judicial Costs in Civil Matters, which states that ‘a commercial company should also demonstrate that its shareholders or shareholders do not have sufficient resources to increase the company’s assets or to grant the company a loan’.
This provision of law in the new wording began to apply on 21 August 2019
Reaching into partners' pockets
The recipe is very controversial. In accordance with the existing rules, the court could grant an exemption from judicial costs to a legal person or an entity which is not a legal person to which the Act confers legal capacity if it has shown that there is insufficient resources to pay them.
Thus, to date, an adequate demonstration of the company's material disadvantage by documenting existing financial liabilities and the lack of income or sufficient assets to cover judicial costs justified the company's exemption from the obligation to pay them.
The amendment creates a number of practical problems for the applicant company to exempt it from judicial costs. The problem may arise, for example, when the company is faced with employee problems among partners, e.g. when there is a conflict between partners that prevents cooperation
On the other hand, as a result of the amendment introduced, 21 August 2019 It will be more problematic for a legal person to obtain an exemption from judicial costs, which will certainly translate into a smaller number of successful requests on the subject.
The reason for the amendment in the scope described is that, unless the company may not have sufficient resources, its shareholders or shareholders may have such funds and should assist their company in covering the judicial costs.
Consequently, in the proposed amendment, the criteria for exempting commercial companies from judicial costs should be supplemented by an obligation to demonstrate that partners or shareholders also do not have sufficient resources to increase their contributions or to grant a loan to the company, in order to obtain funds for the company to fulfil its fiscal obligations in principle related to the conduct of legal proceedings.
Against the law of commercial companies and common sense
There has been a change in the rules for exempting legal persons from the obligation to bear judicial costs remains in clear conflict with the substance of the commercial company as a separate entity of rights and obligations.
First of all, it should be pointed out that the limited liability company, as well as the limited liability company, are completely separate entities with their own assets and that the partners or shareholders are not responsible for their obligations.
Therefore, it is impossible to explain on what basis the liability of judicial costs is imposed on them. In particular, in the case of capital companies, the amendment of the Law on Court Costs seems incompatible with the standards contained in the Commercial Companies Code.
The amendment creates a number of practical problems for the applicant company to exempt it from judicial costs. The problem may arise, for example, when a company is struggling with employee problems among partners, e.g.
when there is a conflict between partners preventing cooperation, which may result in not all partners presenting the required information to the court. The same situation may occur in the event of random events, e.g. partner's illness, long foreign trip etc.
It should also be noted that there may be a large number of shareholders in the capital companies, which also creates difficulties in obtaining the necessary information on their material situation within the prescribed time limit.
Furthermore, capital companies often have a very extensive ownership structure. It is clear that the shareholders in such companies may also be other commercial law companies, so it will then have to document the fact that they are unable to recapitalise their subsidiary. It is also problematic to establish a group of owners where the shareholders of bearer shares, who remain anonymous to the company and identify them within a week or two It's missing reality.
It is therefore difficult not to resist the impression that the aim of the legislator in connection with the amendment is to reduce the number of court proceedings by increasing the actual financial barriers to access to court.
The legislator seems to be guided by the logic that the more expensive and the more difficult it is to obtain exemption from judicial costs to those who need it, the fewer entities will decide to go on trial. Such action should be regarded as not complying with constitutional standards of the right of access to court.
Author: Michał Wasilenko
Lawyer, Senior Associate in the Legal Department, member of the Bar Association in Lublin, graduate of the Faculty of Law and Administration at Maria Curie-Skłodowska University in Lublin. He specializes in commercial and civil law law.