Liability of sp. z o.o. Board Members for Business Decisions

When does a failed business decision turn into personal liability for a board member? I explain the rules of liability and the Business Judgment Rule.

Every board decision — from signing a contract with a counterparty, through approving an investment, to choosing a market strategy — carries the risk that its consequences will be subject to scrutiny not only in economic terms but also legal ones. The question therefore arises: when does a misguided business decision turn into personal liability for a board member? And can we take into account permissible business risk?

Statutory Framework

Under Article 293 § 1 of the Commercial Companies Code, a member of the management board, supervisory board, audit committee, or a liquidator is liable to the company for damage caused by an act or omission contrary to law or the provisions of the articles of association, unless they are not at fault.

This liability is therefore:

1. internal — towards the company itself, not its creditors,
2. compensatory — requires proof of damage, unlawfulness (or breach of the articles of association) and an adequate causal link,
3. fault-based — with a presumption of fault on the part of the board member, who — wishing to escape liability — must themselves demonstrate the absence of fault by showing that due diligence was exercised in performing managerial duties.

Heightened Standard of Care

A board member of a company is expected to exercise heightened diligence, taking into account the professional nature of the activity and observance of the duty of loyalty to the company. A manager is treated as a professional, not an ordinary "debtor", which is also confirmed by Article 209¹ § 1 of the Commercial Companies Code.

This requirement should be understood primarily as an assessment of the decision-making process itself — specifically, whether it was conducted in accordance with proper management standards and demonstrated appropriate managerial competence by the board.

Business Judgment Rule (BJR) — A Shield for Board Members

The business judgment rule has been introduced into the Commercial Companies Code. Under Article 293 § 3 of the CCC, a board member does not breach the duty of care if they:

1. act loyally towards the company, i.e. in particular in its interests,
2. the decision taken remains within the bounds of justified business risk,
3. base the decision on information, analyses and opinions that, in the given circumstances, should have been taken into account in a careful assessment.

The key point is that the assessment is made ex ante — i.e. according to the state of knowledge and circumstances existing at the time the decision was made, not from the perspective of the outcome that subsequently materialised. Even if the decision proves economically misguided, the board member is not liable for its consequences, provided that when making it they followed proper procedures — such as gathering data (research), considering alternatives, seeking expert opinions, or consulting with certified advisors. It is of course in the best interests of board members to document such activities. The BJR protects the decision-making process, not the outcome.

Practical Conclusions

For a board member of a sp. z o.o., liability for business decisions does not reduce to a single provision or a single basis for potential claims. The analysed Article 293 of the Commercial Companies Code operates within the company. The Business Judgment Rule gives managers a clear defence tool, but making use of it requires genuine discipline in the decision-making process: documenting analyses, consciously weighing risk, and maintaining loyalty to the company.