The European Court of Human Rights will be delivering a Grand Chamber judgment1 in the case of Lekić v. Slovenia (application no. 36480/07) at a public hearing on 11 December 2018 at 3 p.m. in the Human Rights Building, Strasbourg.
The case concerns striking a company off a court register and the subsequent liability of its managing
director for the company’s debts.
The applicant, Ljubomir Lekić, is a Slovenian national who was born in 1956 and lives in Ljubljana. During the 1990s, Mr Lekić was a member of the company L.E., holding an 11.11% share. He also became an employee and eventually the managing director. Following the death or serious injury of four key members and managers in 1993, the company experienced financial difficulties. It faced a civil claim for 5,000,000 Slovenian tolars (approximately 20,000 euros) from the Railway Company of Slovenia for unpaid bills for transport services. By 1995 the company was no longer liquid or solvent and it eventually became dormant.
In 1997 the company’s remaining members applied for bankruptcy. However, the competent court rejected the application as there had been no advance payment of costs. The members then decided to wait for the court to decide of its own motion to liquidate L.E., which was possible under the law at the time.
Slovenian company legislation was changed in 1999. The power of the courts to wind up and liquidate companies of their own motion was repealed, and they were instead granted the power to strike dormant companies off the court register without them being wound up. That allowed companies to be dissolved without their assets being collected and used to pay creditors. The members of struck-off companies would assume joint and several liability for companies’ debts.
In 2001, the new procedure was used on L.E., however, the strike-off decision could not be served on the company as it was no longer at its registered address, or any other. According to Mr Lekić, he had learned of the strike-off only in December 2004.
In the meantime, in 2000, the Railway Company had obtained a judgment for L.E. to pay it the outstanding sum. The Railway Company subsequently applied for an enforcement order against the seven members of L.E. for the judgment debt of about 20,000 euros with statutory interest. It was granted an order to seize Mr Lekić’s personal possessions, which was served on him in December 2004.
Mr Lekić lodged an objection in court and applied for a stay. He argued that he had not been an active member of L.E., which exonerated him from the debt. The Ljubljana Local Court found that he had failed to prove his argument. With his 11.11% share in the company, the applicant had enjoyed the rights of a minority member and, moreover, had been involved in the company’s management
since 1993. The court therefore upheld the order and refused to grant a stay of enforcement.
Appeals by Mr Lekić were rejected. In particular, the Constitutional Court of Slovenia held that the measure of “lifting the corporate veil” in the case had been consistent with the Constitution.
In 2010 part of Mr Lekić’s monthly salary payments were seized to pay off the debt. He reached a settlement with the Railway Company the following year. In total, he paid EUR 32,795 to his creditor.
Procedure and complaints
The application was lodged with the European Court of Human Rights on 4 August 2007. Relying in particular on Article 1 of Protocol No. 1 (protection of property) to the European Convention on Human Rights, Mr Lekić complains, among other things, that the striking-off of the company and his ensuing liability interfered with his property rights and amounted to an unlawful deprivation of property. He argues that the lifting of the corporate veil under the strike-off procedure violated the principle of legal certainty, lacked any legitimate aim, and was not justified.
In its Chamber judgment of 14 February 2017, the European Court of Human Rights held, unanimously, that there had been no violation of Article 1 of Protocol No. 1. It considered in particular that the national courts’ finding that Mr Lekić was an active member of the company and thus liable for the payment of its debts was reasonable.
On 18 September 2017 the Grand Chamber Panel accepted Mr Lekić’s request that the case be referred to the Grand Chamber.
The following organisations were granted leave to intervene in the written proceedings as third parties: the Civil Initiative of Forcefully Erased Companies and the Malta Institute of Management.
A Grand Chamber hearing was held in Strasbourg on 14 March 2018.