The sentence of the Poznań WSA may be an argument in favour of members of the boards of limited liability companies who, in disputes with tax authorities, may question the way in which the tax authorities determine the time limit within which the members of the board should submit a request for bankruptcy.
According to the thesis in the recent sentence of the Provincial Administrative Court in Poznań dated 3 October 2019, reference no. I SA/Po 368/19 „the appropriate time for filing a bankruptcy application should be assessed by referring to the notion of insolvency as used in the insolvency law with 2003 and the time limits indicated in that bill for the failed (his) authorities to submit a bankruptcy application.’ Moreover, ‘the question of ‘appropriate time’ should not be assessed mechanically, but always taking into account all the circumstances of the case’.
Tax liability of persons third
Content Article 107(1) Tax Ordinance it follows that in cases and to the extent provided for in Chapter 15 Chapter III entitled "Tax liability of persons third" The taxpayer's tax arrears are jointly and severally liable to the taxpayer's entire assets third.
As recorded Article 107(2)(2)(4) Tax Ordinance persons third they shall also be liable for interest on late tax arrears and for the costs of enforcement proceedings. According to Article 108(1) the abovementioned Act on Tax Liability of the Person third the tax authority shall decide by decision.
Provision Article 116(1) Tax Ordinance points out that the tax arrears of a limited liability company are jointly and severally liable for all of its assets by the members of its management if the execution of the company’s assets has proved to be wholly or partly ineffective and the member of the board has not shown that: in due time, the bankruptcy application has been filed or a restructuring procedure has been opened, or the arrangement for approval of the arrangement has been approved, or the failure to apply for bankruptcy has occurred without its fault, or indicates that the company’s assets from which the enforcement will enable the company to meet the company’s tax arrears to a large extent.
According to section 2 the above-mentioned article, the responsibility of the members of the board of directors covers the tax arrears due to liabilities that were due to expire during their duties as a member of the board of directors.
According to Article 116(4) Tax Ordinance the above-mentioned provisions shall also apply to the former member of the Management Board and to the former proxy or shareholder of the company in the organisation.
The question of "appropriate time" should not be assessed mechanically, but always taking into account all the circumstances of the case
On the basis of the judgment given, the Provincial Administrative Court referred to the NSA’s view expressed in the judgment dated 10 January 2019, reference no. I FSK 143/17 .
According to that judgment on the tax liability of a member of the board of directors for tax arrears of a limited liability company, tax authorities are required to demonstrate that the arrears arise from obligations which have expired during the term of payment of the board of directors and that the execution of the company's assets has proved to be in whole or in part ineffective.
On the other hand, a judgment of liability is excluded if it is found that an application for bankruptcy has been filed in due time or a procedure has been initiated to prevent the declaration of bankruptcy (contractual proceedings) or that failure to file for bankruptcy or failure to initiate proceedings to prevent the declaration of bankruptcy (contractual proceedings) has occurred without fault.
Furthermore, the decision of the board member's liability eliminates the indication of the company's assets, from which the execution will enable the company's tax arrears to be met to a large extent. These conditions constitute the grounds for the negative responsibility of the board member.
Concepts of “appropriate time” for filing a bankruptcy application
In the case-law of the administrative courts, it is widely accepted that the appropriate time for filing a bankruptcy application should be assessed by referring to the concept of insolvency used In the Act dated 23 February 2003 Bankruptcy law and the time limits specified in that Act, designated for the fallen (its authorities) to apply for bankruptcy.
At the same time, however, it is stressed that the question of "appropriate time" should not be assessed mechanically, but always taking into account all the circumstances of the case. According to Article 11(1)(2) Insolvency Law of the debtor shall be considered insolvent if it does not comply with its obligations within the time limit.
In the case of legal persons, the debtor whose liabilities exceed the value of his assets shall also be deemed to be insolvent, and this condition shall continue for a period exceeding twenty four months.
The case-law emphasises that it does not constitute a basis for the determination of temporary insolvency of a lack of liquidity, if, at the same time, the debtor has assets of value to cover his liabilities in the future (cf. the Supreme Court judgment of 23 June 2004, V CK 593/03, opubl. in the Law Monitor with 2015 No 16, p. 875).
Attention is also drawn (cf.
Supreme Court judgments of 22 June 2006, I UK 369/05, of 7 November 2016, III UK 13/16 , available http://sn.pl that the concept of "appropriate time" to apply for bankruptcy in question under Article 116(1)(1) point (a) Tax Ordinance, it must be taken flexibly according to the circumstances of the particular case, since this is an objective condition, based on the facts of each case.
In the judgment of the General Court, unless it precludes the joint and several liability of a member of the board of directors for the company's tax arrears, the existence of one only the creditor, it cannot be considered, in the light of the provisions in force, that there are grounds for filing an application for bankruptcy in the event of a sole existence one arrears whose amount does not exceed the value of the assets held by the company.
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.