In a series of our previous articles, we explored the responsibility of the members of the Board of Directors of an SA. Specifically, we looked int the internal (intra-company) liability of the members of the Board of Directors for their actions or omissions, which risk the company’s property (art. 102-108, law 4548/2018). Also, with the “external” responsibility of the directors of the SA for the direct damage to shareholders or third parties due to their (illegal and culpable) actions. In addition, with the liability of the aforementioned persons vis-à-vis corporate creditors due to causing or delaying the bankruptcy or from tax violations of the SA. In the present article we will examine the other responsibilities (civil, administrative, criminal) that may be borne by the administrators of the SA from custom-related violations of the SA and non-payment of insurance contributions. Also, from the potential disloyalty of the managers of the legal entity at the expense of the latter, as well as from the criminal provisions of the bankruptcy code. And all this in the light of the provisions for money laundering from criminal activities.
Liability From Non-Payment of Insurance Contributions
Joint and several liability of the administrators of the SA, with the latter, is established regarding the (non)payment of insurance contributions.
In particular, legal representatives, presidents, administrators, managing directors, authorized management and liquidators of legal persons and legal entities (as defined in art. 3 of Law 4174/2013) are personally, jointly and severally liable for the payment of insurance contributions, additional fees, surcharges and other charges owed by the legal persons and legal entities to the Social Security Institutions, regardless of the time of their certification. In this case, in order to establish its liability, the conditions for joint and several liability in fiscal offenses must also be met [see art. 31 Law 4321/2015, as amended by Law 4646/2019 (Article 66 of which was amended pursuant to Article 31 Law 4701/2020), and e-EFKA Circular 62/21].
Specifically, in order to establish the said liability of the above persons, the following conditions must be met cumulatively:
(a) The aforementioned persons must have had the above qualities during the time of operation of the legal entity or at the time of its dissolution or merger or during its liquidation.
(b) The debts became overdue during the term of office of the above persons (subject to the law regarding the time of reduction of the debts when any tax is imposed following an audit by a tax authority and the cases subject to settlement). If, therefore, a debt becomes overdue in the following year from the one to which it relates, then the person who exercises the administration of the SA when the debt became overdue is responsible. In other words, the person who was in charge of the SA at the time the disputed debt was incurred is not liable.
(c) The debts were not paid or attributed to the State due to the fault of the above persons-administrators (with the explicit clarification, however, that the burden of proof for the eventual non-existence of culpability is borne by the specific persons). In the event that the above persons are responsible (as discussed above), their culpability is also presumed. Unless these show a lack of culpability. The reformation of the institutional framework related to the issue aims at the assumption of responsibilities by persons who actually exercised management during the critical time of the creation of the tax debt. That is, by persons who had the ability to act in the name and on behalf of the legal entity and fulfill its obligations.
Furthermore, the provision of article 1 §1 and 2 of Law 86/1967 is still in force, which criminalizes – subject to conditions – the non-payment of employer contributions as well as the withholding and non-return of employee contributions. The relevant sanctions are also not insignificant (: a prison sentence of at least 3 months and a cumulative fine of at least 10,000 drachmas and a prison sentence of at least 6 months and a cumulative fine of at least 10,000 drachmas, respectively). At the same time, according to §7 para. a’ of the same article, as perpetrators for employers who are not natural persons, of the relevant offences, the following are considered with regard to national SAs: the presidents of the Board of Directors, the managing directors or authorized or co-acting advisors, the administrators, the general managers or directors and in general any person entrusted either directly by law or by private will or by court order to the administration or management thereof. If all the above persons are missing, the members of the boards of directors of these companies are considered as perpetrators, as long as they actually temporarily or permanently exercise one of the aforementioned duties.
Liability for Customs Violations
Liability of the administrators of the SA may be established (also) due to customs violations.
Specifically, based on the provisions of the Customs Code (law 2960/2001), a customs debt is the obligation of any natural or legal person vis-à-vis the Customs Authority to pay all duties, taxes, including value added tax (VAT), and the other rights of the State, which correspond to goods and burden them according to the relevant provisions.
For the payment of the customs debt, the following are personally and jointly and severally responsible for the payment of the customs debt: the presidents of the Board of Directors, the managing directors or authorized or advisors acting jointly, the administrators, the general managers or directors, and in general, any person authorized, either directly by the law, either by private will or by court order in their administration or management. If all the above persons are missing, the members of the boards of directors of these companies are considered to be perpetrators, if they actually temporarily or permanently exercise one of the aforementioned duties, as well as the SA liquidators, at the time of their dissolution or merger, regardless of the time of attestation of the debt (articles 29 and 153 of paragraph a of Law 2960/2001).
The same, aforementioned, persons are considered perpetrators or, as the case may be, accomplices of the offenses of smuggling and, as a result, are exposed to the relevant (not insignificant) criminal sanctions (: in its basic form, imprisonment of at least 6 months – art. 157).
Liability Under Criminal Provisions of the Bankruptcy Code
The Bankruptcy Code (law 4738/2020) includes a series of provisions (arts. 197-203 of the Bankruptcy Code) that provide for the criminal liability of managers, members of the administration and directors of legal entities to which any bankruptcy is referred, as long as these persons have fulfilled the prescribed in the said provisions unfair acts (art. 202 § 1 Bankruptcy Code). In particular, the persons in question may be held liable for the offences of: (a) bankruptcy (art. 197 Civil Code) and (b) favorable creditor treatment (art. 198 Civil Code).
Furthermore, as expressly defined, administrators, members of management and directors of legal entities are punished with the penalties of §1 of the article on bankruptcy (: prison sentence of at least 2 years and a monetary penalty – no. 197 of the Civil Code), and in the case of receive of advance payments, higher than those provided for in the decision of the competent corporate body or in the statute of the legal entity (art. 202 § 2 Bankruptcy Code).
Liability Under Criminal Code Provisions: The Crime of Infidelity
The management of an SA and its members may be liable (also) under the provisions of the Criminal Code for the crime of infidelity (art. 390 law 4619/2019) when they knowingly cause certain damage to the property of another, who have, by law or legal action, the custody or management.
Regarding administrative offenses against the property of a legal entity, this crime is committed by those who violate the rules of diligent management – of course also the members of the board of directors of the SA.
The persons in question are punished with imprisonment and if the damage caused is particularly great, with imprisonment of at least three months and a monetary penalty. In the distinguished form of the crime, if the damage caused exceeds a total of one hundred and twenty thousand euros, imprisonment for up to ten years and a fine are imposed.
Laundering of Proceeds of Criminal Activities
It is pointed out, finally, that the above crimes of smuggling and non-payment of debts to the State are included in the “basic crimes” for establishing responsibility in terms of money laundering (law 4816/2021). In other words: the crime of legalization of illegal proceeds is concurrent, cumulatively (also) with the aforementioned crimes. The threatened penalties for the crime of money laundering are not at all negligible (: in its basic form, the wrongful act is punishable by imprisonment for up to 8 years and a fine from 300 to one thousand 1,000 daily units – no. 6).
We have already established that the responsibilities of the members of the Board of Directors are extremely extensive. They derive from the provisions of the law on SAs and extend beyond it. The latter, in fact, seem more important. For obvious reasons, it seems that the provisions concerning the liability of the members of the Board of Directors and administrators of the SA for the non-payment of the latter’s insurance obligations seem to attract greater interest. The liability of the liable legal entity and its co-obligatory natural persons/managers is joint and several. Corresponding are the responsibilities of the administrators of the SA from violations of the Customs and Bankruptcy Code. But more important, for many reasons, are the relative criminal responsibilities of the managers-individuals involved. Of course, the responsibilities and penalties of the crime of infidelity. If we consider, in fact, that those responsible will be prosecuted, potentially (and cumulatively) for money laundering, we realize – in this case as well- that the relevant responsibilities are not at all simple. Neither negligible.-
Stavros Koumentakis
Managing Partner
P.S. A brief version of this article has been published in MAKEDONIA Newspaper (September 17th, 2023).
Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.