The Supreme Court has recently clarified that an application for corporate restructuring does not interrupt the joint and several liability period for a company director concerning the company’s debts that may arise if the share capital falls below the so-called critical limit.

It has previously been established that the liability period is interrupted if the company goes into liquidation or bankruptcy. The issue before the Supreme Court was whether an application for corporate restructuring could also interrupt this liability period.

A company (AB1) was granted corporate restructuring on 12 March 2012. In April 2012, AB1 was ordered by default judgment to pay a certain amount plus legal costs to another company (AB2). On 1 April 2013, AB1 was declared bankrupt.

AB2 sued a director of AB1, claiming that the director should be personally liable for the legal costs AB2 had been ordered to pay. AB2 argued that no control balance sheet had been prepared in time, and therefore the director was responsible for debts incurred after the obligation to prepare the control balance sheet arose. The director contended that the liability period had ended when the corporate restructuring was granted — that is, before AB2’s claim arose.

Both the District Court and the Court of Appeal found that the liability period began on 1 March 2012 and did not cease due to the corporate restructuring. The director appealed the Court of Appeal’s decision to the Supreme Court, which granted leave to appeal.

The Supreme Court stated that, unlike liquidation or bankruptcy, corporate restructuring does not restrict the board’s ability to dispose of the company’s assets. Although the board has a duty to comply with the appointed restructuring administrator, actions taken without the administrator’s consent remain valid. Furthermore, no control of the share capital is required as part of corporate restructuring. Accordingly, the Supreme Court held that corporate restructuring serves a different function and purpose than liquidation or bankruptcy, and therefore the liability period is not interrupted by an application for corporate restructuring.