A company’s bankruptcy is often a tragedy for many people emotionally connected with it. Therefore, such persons often delay submitting the bankruptcy petition. A delay, often understandable from an emotional point of view, because the financial situation may improve, because a new, large order may “come” to improve the financial condition, is very dangerous for people holding management functions in companies.

According to Art. 21 of the Act of 28 February 2003, Bankruptcy Law (consolidated text Journal of Of Laws of 2019, item 498 as amended) there is an obligation to submit a bankruptcy petition to the Court within 30 days from the date on which the basis for bankruptcy occurred.

But what does it mean that “there is a ground for bankruptcy”? The basis for bankruptcy is insolvency. We are dealing with insolvency, under Art. 11 above of the Act, in the event of “loss of the ability to meet due financial obligations”.

It is presumed that there has been a loss of the ability to perform due pecuniary obligations if the delay in their performance exceeds three months. In the case of commercial companies, insolvency, within the meaning of the provisions of bankruptcy law, also takes place when financial liabilities exceed the value of the company’s assets, if, according to the balance sheet, the company’s liabilities, excluding provisions for liabilities and liabilities towards related entities, exceed the value of its assets and the state this lasts longer than twenty-four months.
As you can see, to assess whether there are grounds for submitting a bankruptcy petition, an accounting analysis is necessary in this regard.

What does failure to delay in submitting such an application result?

In the case of commercial companies, the obligation to submit this application to the Court rests on everyone who, under the provisions of the Commercial Companies Code and the articles of association or statute of the company, has the right to run the company’s affairs or to represent it individually or jointly with other persons. Most often, such persons are members of the company’s management board or proxies.

In the event of an omission or delay in submitting the application within the period mentioned above of 30 days, these persons are personally liable for the damage caused as a result of failure to submit the application, unless they are not at fault. They may release themselves from liability, in particular, if they prove that in the above-mentioned within the time limit, the restructuring proceedings were opened or the arrangement was approved in the arrangement approval proceedings.
In the event of a claim for compensation by a creditor of such a company, it is presumed that the damage referred to above covers the amount of the creditor’s unsettled debt against that company. In practice, this means the personal property liability (i.e. private property) of people managing companies for their obligations. Delay in filing for bankruptcy is therefore very dangerous and should not be made. Monitoring the amount of liabilities by the accounting department, from the point of view of the provisions of bankruptcy law, enables the submission of a bankruptcy petition within the statutory deadline, guarantees the personal security of persons holding managerial functions.
Let your accountant keep an eye on these issues!