A landmark judgment by the Court of Justice of the European Union (CJEU) on February 27 2025 has challenged Poland’s model of joint and several liability of management board members for their company’s tax arrears. The ruling (in case C-277/24, Adjak) may have significant implications for corporate governance and tax liability for board members across the EU.
Framework for joint and several liability in Poland
Under Polish law, management board members can be held jointly and severally liable for tax liabilities incurred during their tenure if:
Irregularities are identified in the company’s tax settlements;
Enforcement against the company’s assets is deemed ineffective; or
The management board fails to initiate insolvency proceedings within the statutory time limit.
A major issue with this framework is that board members, in proceedings determining their liability, are precluded from disputing the findings of the tax authorities in prior proceedings against the company. They are also not recognised as a party in such proceedings. The tax decision against the company becomes prejudicial and a member of the management board cannot effectively challenge its content.
The CJEU’s ruling
The CJEU concluded that, in proceedings involving joint and several liability for a company’s tax arrears, a board member must be granted:
The right to effectively challenge the findings of the tax authorities in proceedings against the company; and
Access to the case files from those proceedings.
This decision underlines the need to ensure that board members have the opportunity to adequately defend themselves – in accordance with the fundamental principles of EU law – when their personal liability is at stake.
Implications for EU member states
The CJEU’s judgment has broader implications beyond Poland, prompting other EU member states to reassess their regulations concerning the personal liability of company board members. The ruling emphasises the paramount importance of procedural fairness and the right to defence, which are core tenets of EU law.
Impact on the situation in Poland
The CJEU judgment is of fundamental significance for the conduct of proceedings concerning joint and several liability of management board members in Poland. The decision may have a direct impact on all completed and pending proceedings.
In response to the CJEU’s ruling, Poland may be required to amend its tax regulations to ensure that management board members are entitled to:
Participate as parties in tax proceedings against their companies;
Access relevant case files; and
Challenge the tax authorities’ findings effectively.
Such reforms would bring Polish law into alignment with EU standards, ensuring that individuals are not unjustly held liable without the opportunity to mount a proper defence.
Key takeaways from the case
The CJEU ruling in the Adjak case is a very important step towards ensuring tax security for board members in the EU. Questioning the Polish provisions on joint and several liability of board members, the court emphasised the importance of procedural fairness and the right to defence.
The ruling may prompt the introduction of legislative reforms in Poland. It may also lead to the introduction of changes to proceedings on joint and several liability of board members in other EU member states.
