The possibility of issuing a decision on the joint liability of the administrator by the tax authority during the insolvency proceeding
A controversial issue is whether, once insolvency proceedings are opened, the administrator or partner can be held liable for the company's liabilities only under the Insolvency Act. Or whether, on the contrary, his or her liability can also be further incurred by a decision issued by the tax authority under Articles 25 and 26 of the Code of Tax Procedure.
In other words, the question that arises is whether the tax authority can still issue a decision to hold the administrator/partner jointly and severally liable once insolvency proceedings have been initiated?
The issue has been resolved differently by the courts. Some have held that the opening of proceedings is not an obstacle to the issuance of the decision of joint and several liability by the tax authorities, while others have ruled otherwise, holding that, once insolvency proceedings have been opened, only the provisions of Law 85/2014 are applicable, and that any liability of the administrator/partner can only be incurred if the requirements of the insolvency law are met (legal action, mandatory minimum percentage of the claim, etc.) and not unilaterally by the tax authority.
At the meeting of the presidents of the administrative and tax divisions of the High Court of Cassation and Justice and of the Courts of Appeal on 17-18 October 2019, the majority of participants agreed that "the procedure of joint and several liability governed by the provisions of Articles 25 and 26 of the new Code of Tax Procedure also applies if the debtor is in insolvency proceedings governed by Law no. 85/2006 on insolvency prevention and insolvency proceedings".
What lessons can be learned from this meeting:
(i) the matter has not yet been settled by a generally binding judgment (appeal in the interest of the law or preliminary ruling), which means that the possibility cannot be excluded that a court may consider that liability can only be incurred under the conditions laid down in the Insolvency Act;
(ii) the majority practice tends however to confirm the thesis that the tax authority can still make use of Articles 25 and 26 of the Tax Procedure Code to issue the decision to hold the partner/manager jointly and severally liable, without the conditions of the Insolvency Law having to be met for such an issue.
Thus, even if the company has become insolvent and the tax authority does not have sufficient claims to bring an action under Article 169 of Law No. 85/2014, the partner/manager is not immune from liability. There is a possibility (and even a probability!) that the tax authority will issue a decision to hold the partner/manager jointly and severally liable and to start enforcement proceedings against him, pursuing his personal assets. Such a decision must be challenged!
For more information you can write to us at fabian.cretu@fcretu-law.com.
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