Statute of limitations as a lifeline for statutors:

Imagine that your company goes bankrupt and your creditors turn not only to the company, but directly to you as a managing director or board member. They demand hundreds of thousands, claim that you have not acted with due care and want to hold you personally liable. The Supreme Court in its recent judgment of 27 Cdo 2540/2024 of 27 March 2025 commented on the issue of limitation and the specific conditions under which limitation can be a lifeline for an executive or board member.

Author of the article: ​ARROWS (Mgr. Pavel Čech, office@arws.cz, +420 245 007 740)

Liability of members of elected bodies - a powerful tool for creditors

Pursuant to Section 159(3) of the Civil Code, a member of an elected body of a company (e.g., a member of the board of directors or an executive officer) is liable for the company's debt if he or she has caused damage to the company by breaching his or her duties and has not compensated for that damage. Only then can the creditor seek payment directly from that member.

In other words: it is not enough that the company owes. Nor is it enough that a board member acted wrongly.

To succeed, a creditor must prove:

1. that a member of an elected body has breached his or her duties in the performance of his or her duties (e.g. failure to keep accounts, distribution of advances without performance, etc.),

2. by this breach, he caused damage to the company itself,

3. that he did not compensate for this damage,

4. and that the creditor cannot enforce performance directly against the company.

That in itself is no easy task. But there is another crucial aspect that can affect the success of a creditor's lawsuit. Namely, the statute of limitations, which, given the nature of the liability of a member of the statutory body, has its own specificities as described below.

Statute of limitations: strong protection for former statutory officers

The Supreme Court of the Czech Republic emphasized in the above-mentioned decision that a creditor's claim under Section 159(3) of the Civil Code does not stand if the company's right to compensation for damages against a member of the body is already time-barred.

This is even though the creditor's claim against the company itself may not be time-barred.

In other words, if the company has "defaulted" against the statutory body and has not recovered damages from it in time, the creditor cannot "make up" for it.

It's not a formality. The limitation periods are set relatively strictly: three years subjective and ten (or fifteen) years objective.

According to the court, it is not possible to force former board members to keep all the evidence for years after they leave office and prepare for possible proceedings. This would be contrary to legal certainty.

Specifically, the Supreme Court commented as follows:

'The statute of limitations in this case serves (among other things) to protect a member of the board of directors from the unlimited obligation to dispose of supporting documents and other evidence by which he (she) can (must) prove that he (she) made (each individual) business decision in accordance with the rule of business judgment. In other words, the requirement that a board member must be prepared at all times and in relation to all debts of the company (whether or not known to him) to defend his business decisions made in the exercise of his office and to show that they conform to the standard of care of a sound manager, even though the limitation period for the company's right to claim damages has expired, is contrary to the spirit and purpose of the statute of limitations."

What does this mean for practice?

For members of statutory bodies:
The judgment provides crucial reassurance - you cannot be sued "forever". If the company does not claim damages against you in time, creditors cannot do it for it. You have the right to defend yourself with a statute of limitations defense, even in disputes that did not directly involve you.

For creditors:
If you want to claim your debt through the company's statutory body, you need to act quickly. It's not enough that you know about the debt - you must be prepared to prove the entire chain of liability, plus make sure that the company's claim for damages itself is not barred.

Conclusion: liability yes, but with limits

The Supreme Court's decision sets the boundaries for the application of liability under section 159(3) of the Civil Code.Creditors have a powerful tool in their hands, but only if they use it in a timely and correct manner. On the other hand, statutory officers receive an important protection - limitation as a legitimate defence against personal liability for corporate debts.

Do you need advice on how to make timely and correct claims against the statutory body - or on the contrary, how to defend yourself as a former member of the company body? Contact us.

We help companies and individuals defend their rights in a clear, efficient and transparent manner.