Company Board Members’ Liability and Prerequisites for it in Bankruptcy Proceedings

  • Merike Varusk
Keywords: corporate governance, member of a company management board, management and liability, obligations and liability, management mistakes, corporate law, economic offences, offences related to companies, offences related to bankruptcy, prohibition of business, civil responsibility, criminal responsibility, insolvency law

Abstract

The article deals with the question of what kind of liability can be applied to a company board member in bankruptcy proceedings for infringement of his duties. Analysis of company board members’ obligations makes it possible to evaluate a board member’s actions and thereby determine, during the bankruptcy proceedings, whether the company’s insolvency was caused by a grave management error by the board member in question, a deed with constituent elements of an offence, or another element and consequently apply the liability entailed by the infringement of one’s obligations.

According to the principles for applying civil liability, in the event of a grave management error having been committed by a board member, the bankruptcy trustee must file for compensation. If the board member has infringed his obligations but no damage has emerged, there is reason to deliberate whether reason exists to apply penal or bankruptcy liability.

Infringement of a board member’s duties is often also an offence for which the penal code stipulates a liability. Penal liability for a board member who has infringed his obligations follows if his deed corresponds to the constituent elements of an offence stipulated by the Penal Code and he has been proved guilty.

The presumptions for application of bankruptcy liability – in the form of prohibition of business after the bankruptcy proceedings – also include the person’s conviction; for prohibition on business to be applied during the bankruptcy proceedings, there must be a well‑founded suspicion of a crime.

Published
2014-11-30
How to Cite
Varusk, M. (2014). Company Board Members’ Liability and Prerequisites for it in Bankruptcy Proceedings. Juridica International, 21, 186-196. https://doi.org/10.12697/JI.2014.21.17