15 June 2014

In a judgment dated 8 May 2014, the Constitutional Court confirms that the liability for social security debts of a director of a bankrupt private limited liability company is not automatic. The court has a margin of assessment and may take the director's good faith into consideration, among other things.

Pursuant to article 265 § 2 of the Companies Code, the National Social Security Office and the bankruptcy receiver may hold the directors of a bankrupt private limited liability company personally jointly and severally liable for all or part of the social security contributions owed at the time of the bankruptcy.

The existence of their liability depends on the fulfilment of a condition: either it must be determined that their gross negligence caused the bankruptcy, or it must be determined that they were involved in at least two bankruptcies, liquidations or similar operations with social security debts over a period of five years prior to the company's bankruptcy.

The special liability system applies to the directors, former directors and any other persons who had actual management powers with regard to the company's affairs. A similar special liability system also exists for cooperative companies with limited liability and public limited liability companies.

With the second alternative condition mentioned above, the legislator introduced a form of objective liability. The mere fact that the conditions prescribed by law are fulfilled may result in liability, without requiring any fault.

In a judgment dated 8 May 2014, the Constitutional Court ruled on the question whether this strict rule can be reconciled with the Constitution. The judgment answers this question affirmatively, but the Court does specify that this answer only applies if two conditions are fulfilled.

On the one hand, when applying the relevant legal provision, it must be assumed that the court, both legally and factually, may assess the amount of the social security contributions due and that the court has the same assessment authority as the party that filed the claim.

On the other hand, it must also be taken into account that the legislator primarily wanted to hold mala fide directors liable and, hence, it must be accepted that, when determining the amount of the contributions the director must pay, the court may take into account whether or not he/she acted in good faith.

Especially with this last condition, the Constitutional Court apparently wants to provide an important additional argument to bona fide directors of a bankrupt private limited liability company who are called to account for social security debts. Indeed, the Court had previously proposed the first condition – in a judgment dated 17 September 2009 concerning the similar rule for the directors of a bankrupt public limited liability company.