Other consequences of damage caused by a member of the governing body

Implications of breach of managerial due diligence beyond the basic duty to indemnify.

One of the other consequences of a breach of managerial due diligence is the obligation of a member of the governing body to surrender to the business corporation any benefit he or she has received through his or her unlawful conduct. This obligation exists even if he or she has not caused any harm to the business corporation by acting in breach of managerial due diligence. If the benefit cannot be surrendered, the obligated person shall compensate the corporation in cash. For example, acceptance of a bribe by a member of the governing body in exchange for concluding a contract between a third party and a business corporation may constitute an act creating an obligation to surrender the benefit received.

Another possible consequence of causing damage to a legal person is the creation of a guarantee for the debt of the business corporation to its creditor. If a member of an elected body has failed to compensate a legal person for damage caused to the legal person by a breach of duty in the performance of his/her duties, although he/she was obliged to compensate the damage, he/she shall be liable to the creditor of the legal person for the legal person’s debt to the extent to which he/she has failed to compensate the damage, if the creditor is unable to claim performance from the legal person.

A specific case of liability of a member of the governing body is liability in the event of bankruptcy. A court may decide, upon a motion filed by the insolvency administrator or a creditor of a business corporation, that a member or former member of the governing body of the business corporation shall be liable for the performance of its obligations if it has been decided that the business corporation is bankrupt and such member or former member of the governing body knew or should have known and could have known that the business corporation was in imminent bankruptcy and, contrary to the managerial due diligence, failed to do everything necessary and reasonably foreseeable to avert such bankruptcy. However, this rule shall not apply to a member or former member of the governing body of a business corporation who has been demonstrably appointed for the purpose of averting bankruptcy or other adverse economic situation and has exercised his or her office with managerial due diligence.

Liability also arises if a member of the governing body ceases to hold office as a result of a court decision on his or her exclusion. In such a case, he/she shall be liable for fulfilment of all obligations of the corporation which arose at the time when he/she was acting as a member of its governing body despite being prohibited from doing so, although he/she did not become such a member or ceased to be such a member.

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