The Companies Act (hereinafter: CA) regulates the liability of board members for damage in several places, and the basic provisions on the due diligence and liability of board members (Article 252) are laid down in order to protect the interests of the limited liability company.
Members of the board shall be required to conduct the business of the company conscientiously and to keep the company’s business secret. A board member will not contravene the obligation to conduct the company’s business if, in making a business decision, he/she may reasonably assume, on the basis of appropriate information, that he/she is acting for the benefit of the company.
Board members who fail to fulfil their obligations shall be liable for the damage suffered by the company as jointly and severally liable. In the event of a dispute, board members shall demonstrate that they have acted correctly and conscientiously.
In particular, members of the board shall be liable for damage if, contrary to the CA they:
1. return to shareholders what they have invested in the company,
2. make interest or dividend payments to shareholders,
3. subscribe, acquire, pledge or withdraw their own shares in a company or other company,
4. issue shares before the nominal amount or the higher amount for which they are issued has been paid for them as a whole,
5. divide the company’s assets,
6. make payments after the company has become incapacitated, i.e. when the company is over-indebted,
7. grant remuneration to the members of the Supervisory Board,
8. provide a loan,
9. in the case of a conditional capital increase, issue shares contrary to the purpose or before they are paid in full.
Claims for damages against board members may be brought by the company and by the company’s creditors. In proceedings relating to claims for damages brought by the company against the board members, the company shall be represented by the supervisory board.
Where a claim for damages is made by the company, there shall be no obligation to pay compensation where the action of the members of the board is based on a decision of the General Assembly and the approval of the action by the supervisory board shall not exclude liability.
Claims for damages may also be brought by the company’s creditors if they are unable to settle their claims from the company and a member of the management company grossly fails to comply with the obligation to act in a proper and conscientious manner.
As regards the creditors of the company, the obligation to make good the damage cannot be eliminated either by renouncing the claim or by concluding a settlement on the claim, nor by the fact that the action was based on a decision of the General Assembly. Where insolvency proceedings have been opened in respect of the company, the insolvency administrator shall exercise the right of creditors of the company against the members of the board for the duration of those proceedings.
Claims for damages expire in five years.
Article 273 of the CA provides for a specific type of liability of board members for damage to the company, creditors and members of the company, and provides for liability for damage resulting from the exploitation of influence in the company. The specificity of this type of liability lies in the fact that the shareholders or owners of shares are also actively entitled to claim damages if they have suffered damage, irrespective of the damage caused to the company.
The decision to set a claim for damages against persons who have exercised influence in the company shall be taken by the General Assembly by a simple majority of votes. If the General Assembly fails to do so, the same claim may be imposed by shareholders whose shares constitute at least 1/10 of the company’s share capital within six months after the general meeting.
Relevant authority and regulations
Ministry of Justice, Public Administration and Digital Transformation
Ulica grada Vukovara 49
10 000 Zagreb
+385 1 371 45 80
gradjansko.pravo@pravosudje.hr
Companies Act (Official Gazette
111/93,
34/99,
121/99 - authoritative interpretation,
52/00 - Decision of the Constitutional Court of the Republic of Croatia,
118/03,
107/07,
146/08,
137/09,
152/11 - consolidated version,
111/12,
68/13,
110/15 and
40/19)
