Włodarzewska affair (on the criminal liability of supervisory board members)

In the practice of business trading, board members are most often exposed to the risk of white-collar criminal liability. On more than one occasion, the criminal act attributed to managers is the crime of abuse of trust (Article 296 of the Criminal Code).

The act of mismanagement in question can only be committed by persons entrusted with the management of an entity.

As a rule, members of the management board are required to have a higher than average level of knowledge, skills and experience in the management of business affairs, which are assessed under individualised circumstances.

With regard to the offence under consideration, the offender’s conduct may consist of: an abuse of the powers granted or a failure to fulfil a duty incumbent on the perpetrator, which leads to significant financial damage to the company.

Abuse of powers or failure to fulfil a duty may result from breaches both in the sphere of representation of the company and in the conduct of its affairs.

Supervisory board members are not exempted from the risk of criminal liability, e.g. in relation to the crime of mismanagement, as evidenced by the following rulings.

According to the judgment of the Court of Appeal in Kraków of 20 October 2011. (II AKa 145/11):  “A person dealing with other people's property affairs is considered to be only the one whose duties and powers together include both taking care to protect the entrusted property from damage, destruction or loss, deterioration of property interests and using this property in the process of management in such a way that it is increased or its value is increased. Dealing with property or business is understood as any conduct consisting of deciding on such matters, cooperating in decisions or influencing decisions or giving advice, if one is obliged to do so by any title. The term “dealing with” does not include strictly executive acts, nor the execution of strictly defined and precise orders or the performance of duties only to the extent of taking care that the condition of the property does not deteriorate.”

In addition, according to the judgment of the Court of Appeal in Wrocław of 23 October 2006

(II AKa 224/06): “A member of a company's supervisory board may be included in the circle of persons dealing with the company's property affairs first of all when this results unequivocally from the company's statute. The possible lack of appropriate statutory provisions (ascertained after obtaining and analysing the articles of association) providing grounds for including the defendants in the group of persons handling the company’s property affairs does not mean, however, that for this reason alone they could avoid criminal liability under Article 296 of the Criminal Code (in the event of establishing a causal link between their actions and the occurrence of significant or large-scale property damage to the company, as discussed above). This is because the provision of Article 21 § 2 of the Criminal Code comes into play here.”

From a practical point of view, the standard exclusion of the risk of criminal liability from the coverage provided by a D&O policy is important. Therefore, a real safeguard against liability, especially of a punitive nature, is common sense and business decency. A wise and educated legal advisor should also be helpful in assessing the degree of risk, who will sensitise against disinclination and lack of prudence in business dealings, especially at the stage when the company is at risk of insolvency.