In its judgment of 24 January 2023, Case No. 4 Cmo 129/2022, the High Court in Prague dealt with a statute of limitations objection raised by a managing director, who disputed the existence of the prerequisites for the existence of statutory liability under Section 159(3) of the Civil Code (CC) towards creditors in connection with the damage he caused to the company. The managing director argued that he was not obliged to compensate the debtor for the damage claimed against him by the plaintiff as a creditor of the company, because the company had not timely asserted its right to compensation against the managing director, which resulted in the statute of limitations and extinguished the defendant managing director’s obligation to compensate for the damage.

The High Court concluded that one of the prerequisites for the statutory liability of the statutory body for debts of the company is an existing obligation to compensate for damage caused in the performance of its duties. If the right has not been exercised within the limitation period and the debtor contests the limitation in court proceedings, he is not obliged to perform.

If the company’s claim for damages is time-barred, the member of the statutory body must be able to defend himself by objecting with reference to the statute of limitations. Thus, if he is not obliged to compensate the company for the damage as a result of the statute of limitations, he cannot be obliged to perform under the statutory liability under Section 159(3) of the Civil Code.

The decisive moment is the assertion of the right in court, i.e. the date of filing the action. If the right to damages is barred before the creditor has brought an action on the basis of statutory liability, the objection of the defendant member of the statutory body of the company will succeed.

The High Court also considered the conclusion of the Court of First Instance on the beginning and the end of the subjective limitation period to be correct. The court relied on the provisions of Section 619(2) CC, according to which the start of the limitation period is determined by when the entitled person should and could have become aware of the circumstances relevant to the start of the limitation period. In the present case law, these were the second managing director of the company and its majority shareholder.

The second managing director should have supervised the first managing director (the defendant) taking care of the shareholder’s investment in the company on the instructions of the shareholder, which, according to the court, cannot be contrary to the interests of such company. It was not established in the proceedings that the majority shareholder and the other managing director did not have access to the company’s account and were not informed of the payments they considered to constitute the damage. Since they did not intervene and brought the action after the expiry of the 3-year limitation period from the date of the payments in question, their right to compensation was already time-barred before the action was brought.

The High Court did not consider relevant the plaintiff’s objection that the statute of limitations was pleaded contrary to good morals and did not find the necessary exceptional circumstances for denying the right to plead the statute of limitations to justify such an interference with the principle of legal certainty. There was no evidence of the plaintiff’s intent to cause the defendant harm and he did not abuse the statute of limitations to the detriment of the other party.

Author: Veronika Odrobinová, Tomáš Přibyl