The Liability of a Board Member as a Third Party for the Tax Arrears of a Limited Liability Company

Abstract

The institution of ruling on the liability of a management board member of a capital company is regulated by Article 116 of the Tax Ordinance. In the course of initiated proceedings, the tax authority is obliged to gather evidence and assess the prerequisites that condition a ruling in this regard. The authority conducting the proceedings evaluates whether the material and personal conditions for holding a board member liable for the company’s tax arrears are met. Under the mentioned provision, one can distinguish positive and negative prerequisites for ruling on the liability for the company’s tax arrears. Among the positive prerequisites are the expiration of the company’s tax obligation during the board member’s tenure and the ineffective enforcement from the company’s assets, either wholly or partially. The negative prerequisites include the timely submission of a bankruptcy petition, the absence of fault on the board member’s part in failing to submit the bankruptcy petition, and the board member’s indication of the company’s assets from which enforcement would enable the satisfaction of the company’s tax arrears to a significant extent. The article provides a characterization of the institution of ruling on the liability of a management board member, the nature of this liability, and the prerequisites defining this institution, presenting selected views from legal doctrine and case law.