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04.04.2020

Mārtiņš Mežinskis: Inheritance of liabilities

On April 2020, iTiesības published an article by Mārtiņš Mežinskis, partner of PRIMUS DERLING.

The 29 January 2020 decision of the Senate Department of Civil Affairs in case SKC-426/2020 examines the question whether it is possible to inherit obligations arising from claims brought against a member of the Board pursuant to Article 72.1 of the Insolvency Law (IL).

In this case the Senate acknowledged that the contested decision to postpone proceedings was to be reversed, as for the following explanation.
Considering the provisions of Article 72.1 of the IL, the members of the Board are jointly liable for damages caused by a company found to be insolvent if the insolvency proceedings administrator does not receive the documents transferred or the documents received are in a state which prevents a clear view of the insolvent company’s business and the state of the property for the declaration of the insolvency proceedings. Consequently, such joint commitment does not allow the appeal of the judgement to be appealed for only one of the members of the Board.

To the Senates acknowledgment, the status and conduct of a member of the Board is related to the person leaving the succession, namely that the law would personally assume responsibility for the merchant (company). Only a member of the Board may relieve himself or herself of liability for damages not only applicable to claims brought by insolvency administrators in accordance with the procedures specified in the IL, but also to claims for damages against members of the Board based on the presumption of fault set out in Article 169(3) of the Commercial Law. With presumption of fault the court recovers damages from the members of the Board not because of the guilt of causing damage but for failing to demonstrate the innocence of its actions.

Consequently, it is not necessary to suspend the proceedings until the identification of the heir (successor) of the defendant (member of the board), since the rights and obligations in the legal proceedings of the particular kind are personal and the heirs are not transferred at all.

At the same time, the Senate states that the obligation to pay damages to the public should be inherited if the responsibility of the member of the Board is determined by a court judgement in force, because as the judgement comes into force, the liability gains certainty, i.e. the heirs do not have an obligation to defend themselves in proceedings for which they do not have information of.

Full article in latvian language available here