INSIGHTS

The direct liability of the executive officer (managing director of comapnies registered in Hungary)

Category
Company Formation

In principle, the company is liable for the damages caused to third parties by the executive officer. In some special cases as exemptions, the executive officer can be liable personally for the damages caused to third person. These cases are the following:

  • In case the executive officer intentionally caused damages to third parties in his capacity as executive officer, those third parties are entitled to initiate lawsuits directly against the executive officer, and the executive director may be held liable towards them together with the company.
  • In the event of the company’s dissolution without succession, the creditors may bring action for damages against the executive officer on the grounds of non-contractual liability, if the executive officer failed to take the creditors’ interests into account at the time of imminent threat to the company’s solvency. This is not applicable in case the company is wound up without going into liquidation.
  • Any creditor or the liquidator may bring action during the liquidation proceedings to establish that the former executive officer have failed to exercise his management functions in the interests of creditors in the span of three years prior to the opening of liquidation proceedings in the wake of any situation carrying potential danger of insolvency, in direct consequence to which the company’s assets have diminished, or the providing of full satisfaction for the creditors’ claims were frustrated for other reasons.

If the executive director’s liability has been established by the court (i.e. the creditor or the liquidator has won the lawsuit against the executive officer) , the executive director will be liable for satisfying the creditors claim registered in the liquidation proceedings, that were not recovered in such proceedings, up to the extent of loss suffered.

If you have further questions about the above issue, please feel free to contact our experts at AIRON Legal. We are at pleased to assist you!