Liability of directors for damages under Section 11a of the Insolvency Act

Mgr. Adam Nahalka

Has your claim remained uncollected because the debtor has no assets? It need not be the end of the story. Section 11a of Act No. 7/2005 Coll. on Insolvency and Restructuring (ZKR) provides creditors with an effective tool – an action for damages brought directly against a director who failed to file for insolvency in good time. In this article, we will provide a more detailed overview of current case law in such disputes.

Legal basis of the claim

The obligation to file a petition for the declaration of bankruptcy arises for the debtor’s responsible person within 30 days of the moment at which they became aware of the debtor’s insolvency or, had they exercised due professional care, could have become aware of it (Section 11(2) of the ZKR). If they fail to fulfil this obligation in time, they are liable to the debtor’s creditors for any loss they have thereby incurred (Section 11a(1) of the Insolvency Act).

The Act also significantly eases the burden of proof in favour of the creditor through two rebuttable presumptions:

• Presumption of breach of duty (Section 11a(2) of the Insolvency Act) – this applies, amongst other things, where enforcement proceedings or similar enforcement measures against the debtor have been terminated due to a lack of assets, or where bankruptcy proceedings have been discontinued for the same reason.
• Presumption regarding the amount of loss (Section 11a(3) of the Insolvency Act) – unless a different amount is proven, it is presumed that the creditor has suffered a loss to the extent that their claim was not satisfied following the conclusion of enforcement proceedings, the revocation of bankruptcy proceedings or the discontinuation of bankruptcy proceedings due to the debtor’s lack of assets.

Case 1: Judgment of the District Court in Lučenec, case no.: 26C/44/2025, dated 3 February 2026 (became final on 8 April 2026) – the defendant did not contest the amount of damages claimed

In the proceedings before the Lučenec District Court, the claimant sought damages from the managing director of a company which was the debtor under a final and enforceable payment order. Several enforcement proceedings were brought against the company, which the bailiff subsequently discontinued on the grounds that no assets could be identified (Section 61n(1)(c) of the Enforcement Code); the company was subsequently wound up and the claim remained definitively unenforceable.

The defendant did not respond to the claim in the proceedings, failed to appear at the hearing and did not provide any excuse for his absence. The court heard the case in his absence and, pursuant to Section 151(1) of the Code of Civil Procedure, deemed the claimant’s factual allegations—which the defendant had neither expressly nor effectively disputed—to be undisputed.

In view of this procedural situation, the court:

1. found that the suspension of enforcement proceedings due to a lack of assets gives rise to a legal presumption of a breach of the duty to file a petition for the declaration of bankruptcy in a timely manner (Section 11a(2) of the Bankruptcy Act),
2. without further examination, accepted the amount of the loss as being equal to the full amount of the unsatisfied claim, as set out in the enforcement order and its ancillary charges as at the date of the suspension of the first enforcement proceedings (Section 11a(3) of the Bankruptcy Act),

The result is a judgment which upheld the claim almost in its entirety (with the exception of the portion relating to default interest), without the need to conduct expert or other extensive evidence-gathering regarding the amount of the damages.

Case 2: Ruling of the Supreme Court of the Slovak Republic, ref. no.: 2Obdo/50/2023, dated 28 November 2024 – the defendant disputes the amount of damages claimed

The second decision illustrates the fundamental difference caused by the defendant’s active defence in the proceedings. The debtor’s managing director objected, amongst other things, that:

• that at the relevant time, the debtor was not yet insolvent in the form of over-indebtedness (he referred to the ratio of negative equity to turnover achieved),
• that the claimant himself contributed to the non-satisfaction of his claim by failing to lodge an appeal against the order to stay the insolvency proceedings,
• and, above all, that the courts had failed to address the question of what amount the creditor would actually have received had the petition for the declaration of insolvency been filed in good time. In other words, they had mechanically accepted the full amount of the unrecovered claim without examining whether the amount recovered would have been higher even if the petition had been filed in good time.

Despite these objections, the courts of first and second instance upheld the claim in its entirety. The Supreme Court of the Slovak Republic partially upheld the appeal, quashed the decisions of the lower courts and referred the case back for further proceedings. With regard to the amount of damages, it emphasised that, following the raising of the defendant’s objections, one cannot simply rely on the statutory presumption under Section 11a(3) of the Insolvency Act without further ado. The key conclusions of the court of appeal may be summarised as follows:

• The presumption under Section 11a(3) of the Insolvency Act is rebuttable – the defendant, as a statutory representative, has the right to prove that the actual loss is lower (e.g. that even if the petition for the declaration of insolvency had been filed in a timely manner, the creditor’s recovery would not have been higher, or indeed would have been nil).
• If the defendant raises such an objection regarding the amount of the loss during the proceedings, the court must address it on its merits and assess what satisfaction the creditor would hypothetically have achieved had the debtor acted properly and in a timely manner – it is not sufficient merely to mechanically state the amount of the unrecovered debt.
• By contrast, the liability of a statutory representative under Section 11a of the Insolvency Act is not subsidiary to other means of satisfying a claim (insolvency proceedings, enforcement proceedings) – the creditor is therefore not required, as a condition for the success of the action, to prove that they have also exhausted all legal remedies (appeals) in the insolvency proceedings.
• The burden of proof regarding a different (lower) amount of damages lies with the defendant, not the claimant – this therefore remains an advantage for the creditor, but it only applies if the defendant fails to meet their burden of proof.

Comparison of the two cases:

The evidential situation

In the proceedings before the District Court in Lučenec, the defendant did not effectively refute the claimant’s factual allegations; the court therefore regarded them as undisputed within the meaning of Section 151(1) of the Code of Civil Procedure. By contrast, in the case decided by the Supreme Court of the Slovak Republic, the defendant actively challenged individual factual and legal conclusions from the outset (the date of the onset of insolvency, the amount of the debt, the existence of grounds for discharge), which also requires a detailed examination by the court.

Amount of damages

In cases where the defendant does not contest the amount of damages claimed, the court may rely directly on the statutory presumption under Section 11a(3) of the Insolvency Act and accept the amount of the unrecovered claim without further examination. However, if the defendant challenges the amount of damages (as in the case of the Supreme Court of the Slovak Republic), the presumption remains in force but is rebuttable. The defendant has the right to prove that, even if the petition for the declaration of insolvency had been filed in a timely manner, the creditor would not have obtained a higher, or indeed any, satisfaction. In such a case, the court must assess this hypothetical question on its merits; it is not sufficient to mechanically adopt the amount of the uncollected debt.

Scope of evidence

If the defendant does not contest the amount of the loss, basic documents (an enforcement order, certificates of insolvency or an extract from the commercial register) will suffice for the court. However, if the defendant contests the amount of the loss, the scope of evidence is significantly expanded. The court must examine the debtor’s assets at the time when the bankruptcy petition should have been filed and assess how much the creditor would realistically have recovered had the proceedings been initiated in a timely manner.

Practical recommendations for creditors

1. Thoroughly document the course of enforcement/bankruptcy proceedings – the bailiff’s reports on the debtor’s lack of assets, notices of the suspension of enforcement and their publication in the Commercial Gazette are key to satisfying the presumption under Section 11a(2) of the Bankruptcy Act.
2. Anticipate the defendant’s potential defence when preparing the claim – although the law places the creditor in a favourable position regarding the burden of proof, it is advisable to consider in advance the arguments regarding the actual value of the debtor’s assets during the relevant period, so that any objection by the defendant regarding lower damages does not catch the creditor off guard.

Conclusion

The concept of directors’ liability under Section 11a of the Insolvency Act is an effective tool for creditors to recover their claims. Where the defendant (director) remains passive, the court relies on rebuttable presumptions regarding both the breach of duty and the amount of damages within the meaning of Section 11a(2) and (3) of the Insolvency Act. However, if the defendant (director) disputes the amount of the loss, the court must examine the financial circumstances at the relevant time and assess how much the creditor would realistically have recovered had proceedings been brought in a timely manner. 

If you are pursuing a claim against a company whose statutory representative failed to fulfil their duty to file a petition for the declaration of insolvency in good time, the Legate team will help you assess your chances of success and prepare the claim so that it stands up even in the face of an active defence by the defendant.

Author:

Mgr. Adam Nahalka

Senior Associate