The Right of a Management Board Member to a Defence in Proceedings Concerning Liability for a Company’s Tax Arrears – Legal Effects of the CJEU Judgment of 27 February 2025 (Case C-277/24, Adjak)
The judgment of the Court of Justice of the European Union (CJEU) of 27 February 2025 in Case C-277/24 (Adjak) represents a significant legal precedent for members of management boards of capital companies who are subject to proceedings concerning their joint and several liability for the company’s tax arrears under Article 116 of the Tax Ordinance Act. The CJEU confirmed that a management board member need not be a party to the company’s tax assessment proceedings. However, the member must be given a genuine opportunity to defend their rights in the course of the proceedings that may result in their personal liability.
This judgment has considerable implications for the legal practice surrounding the liability of company directors for tax debts.
Pursuant to Article 116 §1 of the Tax Ordinance, a member of the management board is liable with their entire personal assets for the company’s tax arrears, if enforcement against the company proves wholly or partially ineffective, and the member fails to demonstrate that:
– a bankruptcy petition was filed in due time;
– restructuring proceedings were initiated or an arrangement was approved;
– failure to file for bankruptcy occurred through no fault of the board member; or
– there exists company property that enables satisfaction of a significant portion of the tax arrears.
The CJEU emphasised that in such proceedings, the management board member must have the right to access the case files, the right to present counter-evidence, and the right to challenge the factual findings and legal assessments made in the earlier proceedings against the company. These rights must be effective and meaningful, which imposes an obligation on the tax authorities to consider arguments and evidence submitted by the board member.
The Court unambiguously held that if domestic law does not provide otherwise, a management board member is not required to be a party to the tax assessment proceedings concerning the company’s tax liability. However, notwithstanding the lack of party status at that earlier stage, the member must have a genuine opportunity to present a defence in the subsequent proceedings concerning their personal liability. This includes the right to access the tax assessment files, to dispute factual and legal findings contained in the decision against the company, and to submit counter-evidence.
As a result, it is no longer sufficient to base the liability of the board member solely on the presumption of ineffective enforcement or a failure to file for bankruptcy. Tax authorities and courts are now required to allow a substantive review of the existence and amount of the company’s tax liability in the course of determining the personal liability of a board member.
Judicial practice following the CJEU’s judgment has been mixed. In some cases, courts have held that the right to a defence was not infringed, pointing to the passivity of management board members who failed to exercise their procedural rights (e.g. Supreme Administrative Court: III FSK 503/24 and III FSK 1561/23; Regional Administrative Court in Szczecin: I SA/Sz 771/24; Regional Administrative Court in Wrocław: I SA/Wr 160/24). However, judgments of the Regional Administrative Court in Kraków (I SA/Kr 173/25 and I SA/Kr 178/25) and the Regional Administrative Court in Warsaw (III SA/Wa 1840/24) have opened the door to an effective defence in situations where the tax authority failed to grant access to the case files or refused to examine requested evidence.
The implications for management board members are critical: upon receiving a decision holding them liable for the company’s tax arrears, they had until 22 July 2025 (i.e. three months from 22 April 2025, the date the CJEU judgment was published in the Official Journal of the European Union) to consider filing a motion for reopening of the administrative proceedings under Article 272 §2a of the Law on Proceedings before Administrative Courts. This motion should be well-reasoned and supported with evidence challenging the existence or amount of the company’s tax liability.
Looking ahead, management board members should actively participate in all proceedings concerning their liability by demanding access to the case files, submitting factual explanations and evidence, and responding to any procedural irregularities on the part of the authorities. Procedural passivity must be avoided, as courts may interpret it as a waiver of the right to a defence — with serious legal consequences.
In conclusion, the CJEU judgment established a procedural protection mechanism for board members who were not parties to the company’s tax assessment proceedings. Proper use of these procedural rights may result in the annulment of decisions imposing personal liability, particularly where the conditions set forth in Article 116 of the Tax Ordinance are not sufficiently demonstrated. Tax authorities and courts are now under an obligation to respect the right to a defence as a fundamental procedural guarantee.