May 2011 – The Slovak Insolvency Code requires an insolvent company and its director to file a petition for insolvency proceedings within 30 days from the date it becomes aware (or, should have become aware, acting with due care) of the company’s insolvency. This obligation, if breached, may give rise to liability on the part of the company’s director to creditors for damages. In particular, creditors may claim damages in the amount of their claims which remain outstanding following the termination or abandonment of the insolvency proceedings due to insufficient assets, unless evidence to the contrary (i.e. evidence that the director acted indeed with due care) is submitted. Nevertheless, in the past it has not been common practice in Slovakia (despite the increasing number of bankruptcy proceedings) that such claims are made against directors.
However, recently courts’ decisions illustrate that creditors have been paying more attention to the obligation of the company’s director to file a petition for insolvency proceedings within due time. Moreover, in actions of this kind filed against company directors’, the damages awarded by the court may be considerable.
In 29 Cdo 2683/2008 (30 June 2010) before the Czech Supreme Court the customer (the “Claimant”) and the contractor (the “Debtor”) concluded a contract for works in June 2001 with a value of approximately EUR 45,000 (the “Contract”). The shareholders of the Debtor approved the balance sheet for 2000 in June 2001 ignoring the fact that the Debtor had been insolvent since at least 31 December 2000, and intentionally resolved to set off the losses of the Debtor against future income. The Claimant, a creditor of the Debtor, filed a petition for insolvency against the Debtor in October 2001. In the course of the insolvency proceedings of the Debtor the Claimant received almost no compensation for its claim (amounting to approximately EUR 35,000). Consequently, in February 2008, the Claimant commenced proceedings for damages against the Debtor’s directors on the grounds that the directors had breached their duty to file a petition for insolvency proceedings within due time. In the case, the court concluded that the Claimant would not have suffered the above loss if the directors had complied with their obligation to file for insolvency as the Claimant would not have reasonably concluded the Contract if it had known that the company was insolvent (i.e. in bankruptcy proceedings). The court awarded damages to the Claimant.
For further information, please contact Viliam Mysicka, Counsel, at .