There is a general rule on the liability of management in case of the companies’ dissolution without success. This means that, if the management fails to take the creditors’ interest into account after insolvency takes place, the management shall be liable for damages up to claims outstanding on the ground of non-contractual liability.
In the event of a liquidation proceeding, it is possible to establish that the management failed to properly represent the interests of creditors during a three-year period prior to the commencement of the liquidation proceedings. Inadequate representation might origin from carrying potential danger of insolvency, which can result in asset reduction of the company or the frustration of full satisfaction for the creditors.
According to the Hungarian Bankruptcy Act, the management shall not be liable if they are able to prove that:
- they did not undertake any business risk that may be considered unreasonable for the debtor’s interest, and
- they took all measures to prevent and mitigate the losses of creditors such as urging the supreme body to take actions upon the occurrence of potential insolvency.
Criminal liability of the directors may arise if a company carries on businesses and conflicts with the creditors’ interest while insolvent.