1. Liability towards the Tax Administration
Article 50 of the Tax Procedure Code (Law 4174/2013), as in force, stipulates that: "1. Persons who are executive chairmen, directors, general managers, managers, managing directors, executive directors and liquidators of legal persons and legal entities, as well as persons who effectively manage or manage a legal person or legal entity; are personally and jointly and severally liable for the payment of income tax, withholding tax, any applicable tax, Value Added Tax and the Single Property Tax due by these legal persons and legal entities, regardless of the time of their assessment, as well as for interest, fines, surcharges and any administrative pecuniary sanctions imposed on them; provided that all of the following conditions are met:
a. the above persons had one of the above qualities either during the operation of the legal person or at the time of its dissolution, or merger or during the liquidation of the legal person,
b. debts have fallen due during their term of office in one of the above capacities, subject to the following subparagraphs. If debts are established following an audit, only persons who fulfilled the conditions laid down in subparagraphs (a) and (c) during the tax year or period to which those debts relate shall be considered to be jointly and severally liable within the meaning of this paragraph. In the event that the persons referred to in para. 1 tax debts have been regulated, joint and several liability shall also be borne by the persons who fulfilled the conditions set out in subparagraphs (a) and (c) at the time when each instalment of the arrangement fell due or the arrangement was lost. In respect of the amounts of interest, surcharges, fines and other pecuniary penalties, joint and several liability shall be borne by the persons jointly and severally liable for the principal debt on which those amounts are calculated and imposed;
c. the said debts were not paid or attributed to the State due to the fault of the above persons. The burden of proof for the absence of fault shall lie with the persons referred to in paragraph 1. By joint decision of the Minister of Finance and the Governor of the Independent Authority for Public Revenue, indicative cases of lack of fault may be defined.".
Therefore, we see that the IKE manager, regardless of his corporate capacity, is personally and solidarily liable to the Tax Administration for the payment of any applicable tax due by IKE, regardless of the time of their assessment, as well as for interest, fines, surcharges and any administrative pecuniary sanctions imposed on them, if he is a manager, the debts fell due during his term of office and these debts were not paid or reimbursed to the State through his fault. Also, in case of an audit carried out in the company even after the departure of the manager, he is liable for debts arising for the uses during which he managed the company.
However, with the no. 1837/2020 decision of the Council of State held that the mere status of legal representative of a company is not sufficient for the lawfulness of the imposition of safeguard measures in favour of the State, but requires, in addition, that the tax authority prove whether it had actually exercised administration.
2. Liability for insurance contributions
Based on Article 31 of Law 4321/2015 on joint and several liability for the payment of insurance contributions, as amended, it is stipulated that: "1. Persons who are legal representatives, presidents, managers, managing directors, executive directors and liquidators of legal persons and legal entities, as defined in Article 3 of Law 4174/2013 (Tax Procedure Code, A' 170), at the time of their dissolution or merger, they are personally and jointly and severally liable for the payment of insurance contributions, additional fees, surcharges and other charges due by these legal persons and legal entities to the Social Security Institutions regardless of the time of their confirmation, provided that the following cumulative conditions are met: a. the above persons had one of the above qualities either during the operation of the legal person or at the time of its dissolution, dissolution or merger or during the liquidation of the legal person, b. debts have fallen due during their term of office in one of the above capacities, subject to the following subparagraphs. If debts are established as a result of an audit, only persons who fulfilled the conditions laid down in subparagraphs (a) and (c) in the year or period to which those debts relate shall be considered to be jointly and severally liable within the meaning of this paragraph. In the event that the debts referred to in paragraph 1 have been subject to arrangement, joint and several liability shall also be borne by the persons to whom the conditions set out in subparagraphs (a) and (c) were fulfilled at the time when each instalment of the arrangement fell due or the arrangement was lost. In respect of the amounts of interest, surcharges, fines and other pecuniary penalties, joint and several liability shall be borne by the persons jointly and severally liable for the principal debt on which these amounts are calculated and imposed; these debts were not paid or reimbursed to the State through the fault of the above persons. The burden of proof for the absence of fault shall lie with the persons referred to in paragraph 1. By decision of the Minister of Labour, indicative cases of lack of fault may be defined. ()».
Therefore, similar to tax legislation is the regulation of the joint and several liability of managers for the payment of insurance contributions.
In this regard, EFKA Circular 9/2020 has also been issued, which specifies how to implement the above provision.
3. Liability towards the same legal person (IKE)
Since the manager of IKE is by law its representative and the person exercising management in his capacity, he is accountable to the company.
Liability is based either on violation of the law, the articles of association or the decisions of the partners, or on management fault.
Of course, this liability of the manager is limited: a) to the case that it is based on a lawful decision of the partners, b) through the possibility of exonerating him from liability and c) due to the short limitation period of the company's claim which is three years.
Therefore, based on the above, the liability of the manager towards the company concerns the culpable violations by the manager regarding his compliance with the law governing the corporate operation of IKE (Law 4072/2012), the company's articles of association and the decisions of the partners.
4. Liability towards third parties
According to the provisions of the Civil Code, the manager of IKE is jointly and severally liable with the company, to third parties, in accordance with Article 71 of the Civil Code, in case of wrongful act or omission, which gives rise to an obligation to compensate either due to breach of contractual obligations or due to tort.
In conclusion, we note that managers and generally those who choose the corporate form of PC,should be aware that the Tax Administration acts in accordance with the circulars and allocates the amounts when the formal conditions are met. If the substantive conditions for the liability of a trustee are not fulfilled at the same time, the taxpayer will necessarily have to go to court for exemption.