Liabilities of directors: Difference between revisions

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The main principle of directors' '''liabilities''' is that they must act with the care of a reliable, prudent businessman. Directors are jointly and severally liable for any damage suffered as a result of a breach of this obligation. It is the directors' responsibility to demonstrate that they have met the requirements of this obligation. Any violations may result in civil and / or criminal penalties.
The main principle of directors' '''liabilities''' is that they must act with the care of a reliable, prudent businessman. Directors are jointly and severally liable for any damage suffered as a result of a breach of this obligation. It is the directors' responsibility to demonstrate that they have met the requirements of this obligation. Any violations may result in civil and / or criminal penalties.
In principle, the duty of diligence lies with the company, and hence it can enforce these obligations or claim damages arising out of violation of these obligations. However, there are circumstances in which the entity
In principle, the duty of diligence lies with the company, and hence it can enforce these obligations or claim damages arising out of violation of these obligations. However, there are circumstances in which the entity
shareholders or categories of shareholders, as well as third parties, may assert their rights directly against directors (Paul J. Omar, 2011, s. 12-14).  
shareholders or categories of shareholders, as well as third parties, may assert their rights directly against directors (Paul J. Omar, 2011, p. 12-14).  


'''Liabilities of directors''' - Directors usually do not have personal responsibility for actions, but may be sued by shareholders for violation of directors' duties. In general, they are also not responsible for errors of assessment but may be sued by third parties or shareholders for negligence. However, they are held solely responsible for failures to withhold and/or competencies at the source of taxes, such as [[employee]] source deductions and sales taxes, such as general sales tax or value-added tax.
'''Liabilities of directors''' - Directors usually do not have personal responsibility for actions, but may be sued by shareholders for violation of directors' duties. In general, they are also not responsible for errors of assessment but may be sued by third parties or shareholders for negligence. However, they are held solely responsible for failures to withhold and/or competencies at the source of taxes, such as [[employee]] source deductions and sales taxes, such as general sales tax or value-added tax.


==Examples of liability==  
==Examples of liability==
The director may be '''personally''' responsible:
The director may be '''personally''' responsible:
* on contracts signed by him allegedly on behalf of the [[company]] before its founding
* on contracts signed by him allegedly on behalf of the [[company]] before its founding
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In section 25(3) of the '''Company Act''', specific examples of cases where directors are found guilty of violating [[due diligence]] are listed.  
In section 25(3) of the '''Company Act''', specific examples of cases where directors are found guilty of violating [[due diligence]] are listed.  
They include (Paul J. Omar, 2011, s. 14-15):
They include (Paul J. Omar, 2011, p. 14-15):
* when the director, contrary to the provisions of the Companies Act or company statute, distributes the company's assets.
* when the director, contrary to the provisions of the Companies Act or company statute, distributes the company's assets.
* when the director makes payments from the company's funds after the day on which the directors were obliged by law to file for bankruptcy.
* when the director makes payments from the company's funds after the day on which the directors were obliged by law to file for bankruptcy.


'''Liability''' also arises for any violation of anti-competitive provisions contained in art. 24 of the Act on companies, which results in a loss for the company (Paul J. Omar, 2011, s. 14-15).
'''Liability''' also arises for any violation of anti-competitive provisions contained in art. 24 of the Act on companies, which results in a loss for the company (Paul J. Omar, 2011, p. 14-15).


{{infobox5|list1={{i5link|a=[[Fiduciary bond]]}} — {{i5link|a=[[Approval authority]]}} — {{i5link|a=[[Confession Of Judgment]]}} — {{i5link|a=[[Beneficiary Of Trust]]}} — {{i5link|a=[[Disclosure requirements]]}} — {{i5link|a=[[Resignation of directors]]}} — {{i5link|a=[[Contractual liability]]}} — {{i5link|a=[[Indemnity clause]]}} — {{i5link|a=[[Statutory lien]]}} }}
{{infobox5|list1={{i5link|a=[[Fiduciary bond]]}} — {{i5link|a=[[Approval authority]]}} — {{i5link|a=[[Confession Of Judgment]]}} — {{i5link|a=[[Beneficiary Of Trust]]}} — {{i5link|a=[[Disclosure requirements]]}} — {{i5link|a=[[Resignation of directors]]}} — {{i5link|a=[[Contractual liability]]}} — {{i5link|a=[[Indemnity clause]]}} — {{i5link|a=[[Statutory lien]]}} }}
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* Davies P., Klaus J. H., Nowak R., Van Solinge G. (2013), [https://books.google.pl/books?id=jBcbAgAAQBAJ&lpg=PA482&dq=Corporate%20Board%20Member%20and%20Price&hl=pl&pg=PA482#v=onepage&q=liabilities&f=false''Corporate Boards in European Law: A Comparative Analysis''], Oxford University Press, Oxford
* Davies P., Klaus J. H., Nowak R., Van Solinge G. (2013), [https://books.google.pl/books?id=jBcbAgAAQBAJ&lpg=PA482&dq=Corporate%20Board%20Member%20and%20Price&hl=pl&pg=PA482#v=onepage&q=liabilities&f=false''Corporate Boards in European Law: A Comparative Analysis''], Oxford University Press, Oxford
* Larcker D., Tayan B. (2011), [https://books.google.pl/books?id=NH10DwAAQBAJ&lpg=PT12&dq=liabilities%20of%20directors&hl=pl&pg=PP1#v=onepage&q=liabilities%20of%20directors&f=false''The Duties and Liabilities of the Board of Directors''], FTPress Delivers Upper Saddle, New Jersey
* Larcker D., Tayan B. (2011), [https://books.google.pl/books?id=NH10DwAAQBAJ&lpg=PT12&dq=liabilities%20of%20directors&hl=pl&pg=PP1#v=onepage&q=liabilities%20of%20directors&f=false''The Duties and Liabilities of the Board of Directors''], FTPress Delivers Upper Saddle, New Jersey
* Omar P. J. (2011), [https://books.google.pl/books?id=NH10DwAAQBAJ&lpg=PT12&dq=liabilities%20of%20directors&hl=pl&pg=PP1#v=onepage&q=liabilities%20of%20directors&f=false''Directors' Duties and Liabilities''], Ashgate Publishing and Dartmouth Publishing Company, New York
* Omar P. J. (2011), [https://books.google.pl/books?id=NH10DwAAQBAJ&lpg=PT12&dq=liabilities%20of%20directors&hl=pl&pg=PP1#v=onepage&q=liabilities%20of%20directors&f=false''Directors' Duties and Liabilities''], Ashgate Publishing and Dartmouth Publishing Company, New York


{{a|Łukasz Gil}}
{{a|Łukasz Gil}}
[[Category:Organizational culture]]
[[Category:Organizational culture]]

Latest revision as of 23:52, 17 November 2023

The main principle of directors' liabilities is that they must act with the care of a reliable, prudent businessman. Directors are jointly and severally liable for any damage suffered as a result of a breach of this obligation. It is the directors' responsibility to demonstrate that they have met the requirements of this obligation. Any violations may result in civil and / or criminal penalties. In principle, the duty of diligence lies with the company, and hence it can enforce these obligations or claim damages arising out of violation of these obligations. However, there are circumstances in which the entity shareholders or categories of shareholders, as well as third parties, may assert their rights directly against directors (Paul J. Omar, 2011, p. 12-14).

Liabilities of directors - Directors usually do not have personal responsibility for actions, but may be sued by shareholders for violation of directors' duties. In general, they are also not responsible for errors of assessment but may be sued by third parties or shareholders for negligence. However, they are held solely responsible for failures to withhold and/or competencies at the source of taxes, such as employee source deductions and sales taxes, such as general sales tax or value-added tax.

Examples of liability

The director may be personally responsible:

  • on contracts signed by him allegedly on behalf of the company before its founding
  • for damages if as a result of negotiating a contract between a company and a third party, it is misleading as a result of fraud or neglect
  • based on a contract, unless he explains that he concludes the contract in person and not as a company representative.
  • a third party for damages arising from a breach of an implied guarantee of authority, if it concludes a contract on behalf of the company, but exceeds its authority in this respect, and therefore the company is able to withdraw from the contract.

In section 25(3) of the Company Act, specific examples of cases where directors are found guilty of violating due diligence are listed. They include (Paul J. Omar, 2011, p. 14-15):

  • when the director, contrary to the provisions of the Companies Act or company statute, distributes the company's assets.
  • when the director makes payments from the company's funds after the day on which the directors were obliged by law to file for bankruptcy.

Liability also arises for any violation of anti-competitive provisions contained in art. 24 of the Act on companies, which results in a loss for the company (Paul J. Omar, 2011, p. 14-15).


Liabilities of directors — recommended articles
Fiduciary bond — Approval authority — Confession Of Judgment — Beneficiary Of Trust — Disclosure requirements — Resignation of directors — Contractual liability — Indemnity clause — Statutory lien

References

Author: Łukasz Gil

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