The Civil Code stipulates a special liability for the debts of a company that applies to the members of its elected body, such as a statutory executive, a member of the board of directors, or the administrative board (hereinafter referred to as the “statutory executive”). This liability arises if the statutory executive breaches their duties, resulting in damage to the company that they fail to reimburse. If the company’s creditor is unable to enforce the debt against the company, they may demand that the statutory executive, as guarantor, pay the company’s debt.
Damage to the company can include the creation of a debt, regardless of whether it has already been paid by the company. This debt may also be a public debt, such as tax arrears. Creditors, such as the tax or customs office, can claim the fulfilment of the guarantee obligation of the company’s statutory executive.
The Supreme Court stated in its judgment in Case No. 27 Cdo 1993/2023 that if the tax administrator believes that the statutory executive is responsible for the company’s tax arrears and intends to recover these arrears from the statutory executive, it must follow the procedures outlined in the Tax Code rather than pursuing a private law action.
The Tax Code authorises the tax administrator to require the guarantor of a tax subject to pay tax arrears within a specified period. The tax administrator can independently determine whether the conditions specified in the Civil Code for establishing a statutory executive’s guarantee obligation are met, without relying on a court decision. A guarantee notice issued by the tax administrator functions as an enforceable decision. Therefore, the existence of the company’s tax arrears poses a significant risk to the statutory executive, as the tax administrator may issue a guarantee notice and enforce the tax arrears against them.
Administrative courts have repeatedly stated in their case law that the purpose of the guarantee provision in the Tax Code is to ensure that the public obligation to pay taxes is fulfilled by another person when the tax debtor fails to pay the tax. The guarantor’s obligation to pay the tax debt arises when the tax debtor does not fulfil their obligation. The tax administrator can only demand payment from the statutory executive as a tax guarantor when it is evident that the debt will not be recovered from the tax debtor. However, the tax administrator is not required to exhaust efforts to enforce the tax arrears against the tax debtor before issuing a guarantee notice.
The guarantee notice must include the tax administrator’s assessment of how the statutory executive of the company breached their duty to exercise their office with due care, including the necessary loyalty, knowledge, and diligence. This assessment should consider the level of care that a reasonably diligent person would have exercised in a similar situation if they had been in the position of the statutory executive. In disputed cases, the statutory executive is responsible for proving that they acted with due care, as the burden of proof is reversed on this issue.
Additional conditions for the establishment of a guarantee obligation of the statutory executive include the occurrence of damage directly linked to the breach of due diligence. Damage can manifest as property loss on the side of assets or liabilities, meaning it can also include the accrual of tax debt, encompassing not just tax arrears but also interest on late payments or execution costs. The statutory executive becomes liable only if they fail to compensate the company for the incurred damage. However, according to case law, the company is not required to actively request payment from the statutory executive for the incurred damage. The tax authority is not obligated to delay action until the statutory executive’s obligation to compensate the company’s damages matures. Instead, it may demand payment of the tax debt as soon as it becomes aware of the statutory executive’s liability for the damage inflicted on the company. The statutory executive must assert and substantiate the fact that they have compensated the company for the damage, thereby negating any liability.
The tax administrator may transfer the obligation to pay tax arrears from the tax subject itself to an influential person as a guarantor through a guarantee notice, based on the conditions outlined in the Business Corporations Act. An influential person is someone who, through their effective influence, significantly affects the company’s behaviour to its detriment. This could include individuals such as the beneficial owner or the parent company. The influential person is obligated to compensate for the damage caused and is also liable to creditors for fulfilling the resulting debts. Similar to the liability of the company’s statutory executive, the influential person must prove the circumstances that preclude their obligation to indemnify.
The administrative courts have affirmed that the tax administrator can pursue the recovery of tax arrears from multiple individuals, whether they are statutory executives or influential persons. In such instances, the courts have recognised a joint and several obligation of the guarantors to settle the claimed tax arrears. If a dispute arises, legislation and case law impose the burden on the guarantors to demonstrate that the conditions for establishing the guarantee obligation did not apply to them. However, any dispute does not hinder the tax administrator from enforcing the tax liability delegated to the guarantor.
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