Liability of the Managers and the Members in the Liquidation Procedure
By Dr Attila Kovács, Kovács Réti Szegheõ Attorneys at Law
According to the modification of the Liquidation Act that comes into effect on 1 July, it will no longer be possible to initiate a direct condemnation procedure against the managers. As a first step, the creditor or the liquidator (in the name of the debtor company) has to ask the court to establish the liability of the managers. Bringing action for condemnation is only possible in the possession of a judgement stating the liability.
The behaviours suitable for establishing the liability have not changed, in so much that after the occurrence of the potential danger of insolvency the interests of the creditors shall be considered. Previously it had to be proved that there was causation between the conduct of the manager and the diminishing of the economic operator’s assets. This rule has been amended so that it is enough to prove, from 1 July, that providing full satisfaction for the creditors’ claims may be frustrated for other reasons. There is also a new possibility for a manager for not being held responsible if he proves he has not undertaken any business risk that may be considered unreasonable in light of the debtor’s financial position.
Compared to the prior rules, there is a novelty that where a manager fails to perform or improperly performed the requirement prior to the opening of liquidation proceedings of having to deposit and publish the economic operator’s annual accounts, the burden of proof lies with the manager to prove that no situation carrying potential danger of insolvency has occurred during his tenure as manager – or, if such a situation has in fact occurred, that he has performed his management functions in due consideration of the interests of creditors, and of the other managers.
The novelty in terms of the responsibility of the controlling party or the sole member (shareholder) of the debtor is that the creditor or the liquidator (in the name of the debtor company) – on account of such a debtor having had a history of making unfavourable business decisions from the standpoint of the debtor – may file a claim for the court to satisfy the creditor’s claim registered in the liquidation proceedings, which are not covered in the liquidation proceedings.
Dr. Attila KovácsKovács Réti Szegheõ Attorneys at Law, Budapest, Hungary
T: +361 275 27 85
Kovács Réti Szegheő Attorneys at Law, established in 1992, is one of the oldest independent Hungarian law firms. It is active in Hungarian, English, German and Italian and operates over a wide spectrum within the fields of civil and business law, for both domestic and international clients. Kovács Réti Szegheő Attorneys at Law has gained immersive experience in the fields of corporate law, mergers and acquisitions, construction law, real estate law, securities law, bankruptcy law, labour and employment, competition law and intellectual property law.
Attorney-at-law and senior lawyer, Dr. Attila Kovács graduated in 1996. After gaining professional experience in Hungarian and German law offices, he became a member of Kovács Réti Szegheő, and has been a Managing Partner since 2004. He speaks Hungarian, English and German and his primary areas of practice are bankruptcy law, real estate law and corporate law.
Published: Winter 2017 l Photo: Denis - Fotolia.com