Did you know that a company’s bankruptcy can expose its managers and board members to both civil and criminal liabilities, as well as the loss of certain rights?
Managers and board members of joint-stock companies, or managers of limited partnerships and limited liability companies, can be held accountable for their actions leading up to bankruptcy or for their mismanagement during bankruptcy proceedings. These responsibilities arise from potential violations of the law, breaches of the company’s bylaws, or simple management errors, all of which may cause harm to the company and its stakeholders.
According to Article 167 of the Lebanese Commercial Code, civil liability is clearly defined for those responsible in the event of a company’s bankruptcy. Additionally, Articles 692 and 689 of the Penal Code, along with Article 639 of the Commercial Code, specify penalties for fraudulent bankruptcy. These penalties apply to partners in general partnerships, authorized partners in limited partnerships, and managers or members of the board of directors in joint-stock companies. In certain cases, the penalty of negligent bankruptcy is applied under Articles 690 and 691 of the Penal Code.
With such serious legal consequences at stake, managers and board members must remain diligent, prioritize the company’s interests, and ensure their decisions align with legal standards. It is crucial to seek guidance from lawyers specializing in commercial and tax laws to protect themselves and ensure their actions are compliant with applicable laws, thereby avoiding personal liability for management mistakes or violations.