Joint and several liability of company directors for tax debts: when individuals pay for their company’s taxes

In reality, the Romanian Fiscal Procedure Code (Law no. 207/2015) expressly regulates situations in which persons other than the main debtor – including company directors – may be obliged to pay the company’s outstanding tax liabilities jointly and severally with the company. The general rule is found in Article 25 of the Fiscal Procedure Code, complemented by Article 26 on establishing liability and by a detailed administrative procedure adopted through secondary legislation, published on the Romanian Legislative Portal and on the ANAF website.

This article aims to explain, in accessible language:

• when and under what conditions the tax authority may engage a director’s joint and several liability for the company’s tax debts;
• how the ANAF procedure for establishing joint and several liability works in practice;
• what defence tools the targeted individual has at their disposal;
• what the practical consequences are for personal assets and what can be done preventively.

Throughout the article we will refer to the relevant legal provisions and public resources (doctrinal articles and case-law) available on platforms such as the Legislative Portal – Law no. 207/2015, Law no. 85/2014 on insolvency, jurisprudenta.com, Legal Land, indrumari-juridice.eu or rcp-legal.ro.

1. Legal framework: where is joint and several tax liability regulated?

Joint and several tax liability is regulated in the Fiscal Procedure Code, in particular in Articles 25 and 26, under Title II on the tax legal relationship. The consolidated text of the Code can be consulted both in the official version published on the Legislative Portal and in commercial or professional databases such as Wolters Kluwer Romania or legislatie.info.

In short, Article 25 lays down the categories of persons who may be held jointly and severally liable with the main debtor for outstanding tax obligations, while Article 26 states that such liability is established through a decision issued by the competent tax authority, which constitutes a tax administrative act and a tax assessment title.

In addition, a detailed administrative procedure on establishing joint and several liability was approved by an order of the ANAF President, published on legislatie.just.ro. That procedure describes the steps to be taken by the tax authority: identifying the persons concerned, checking documents, hearing the person, drafting and issuing the decision and serving it. Practical explanations of this procedure are available, for example, on CECCAR Arad and blog.ilegis.ro.

2. The notion of joint and several liability: what it means in practice

In legal terms, “joint and several liability” means that two or more debtors (in our context, the company and its director) can be pursued for the same debt, and the creditor (the state, acting through ANAF or the local tax authority) may claim the full amount from any of them. The person who pays may then seek recourse against the other co-debtors, but this is a separate issue governed by civil law.

Applied to taxation, this translates into:

• the company is the main debtor for tax liabilities (corporate income tax, VAT, payroll taxes and contributions, etc.);
• under specific conditions, directors, shareholders or other persons may be held jointly and severally liable for part or all of those obligations;
• the tax authority may enforce directly against the director, on the basis of the joint and several liability decision, without the need for a separate court judgment;
• amounts recovered from the director extinguish the company’s obligations, according to the rules on the extinguishment of tax liabilities in the Fiscal Procedure Code.

This is not a criminal penalty, but an extension of civil (patrimonial) liability for tax debts, applied under strict statutory conditions.

3. Categories of persons who may be jointly and severally liable (Article 25 FPC)

Article 25 of the Fiscal Procedure Code lists several categories of persons who may be held jointly and severally liable with the main debtor. For our purposes, the most relevant are directors, shareholders and other persons who have caused the debtor’s insolvency or have intentionally determined non-declaration or non-payment of tax liabilities.

The full text can be consulted on legislatie.info – Article 25, but in simplified terms it covers situations such as:

• persons who acquire assets from a debtor who deliberately renders itself insolvent through those transfers (letter a);
• directors, shareholders or other persons who cause the debtor’s insolvency by transferring or concealing, in bad faith, the company’s assets (letter b);
• directors who, in bad faith, fail to comply with the legal obligation to file for insolvency in due time (letter c), an obligation also provided by Law no. 85/2014 on insolvency – Article 66;
• directors or other persons who, in bad faith, have determined the non-declaration or non-payment of tax liabilities when due (letter d);
• directors or other persons who cause undue reimbursements or refunds from the budget (letter e).

Article 25 paragraph (2¹) also provides for liability of persons who, in bad faith, have caused the accumulation of tax debts and the debtor’s evasion from payment in the case of debtors in respect of whom a request for opening insolvency proceedings has been lodged.

In addition, paragraph (3) covers situations involving groups of companies under common control, in which another company that controls or is controlled by the debtor may be jointly and severally liable, under certain conditions relating to transfer of assets or staff. These complex cases are examined in doctrine and case-law, including analyses published on Legal Land and podoleanu-paun.ro.

4. Key conditions for engaging directors’ joint and several liability

Not every director of a company with tax arrears will automatically be held personally liable. Joint and several liability is an exceptional measure that requires a set of cumulative conditions. Based on Article 25 FPC, ANAF practice and case-law, several core elements emerge.

4.1. Existence of outstanding tax liabilities and (usually) tax insolvency

In most cases, directors’ joint and several liability is linked to a situation where the company has outstanding tax liabilities and is declared insolvent for tax purposes under the Fiscal Procedure Code. Insolvency, in this context, is usually evidenced by a tax insolvency report drawn up by the tax authority after checking the company’s assets and bank accounts and after exhausting standard enforcement actions.

Practical explanations on the conditions and effects of tax insolvency are available on websites such as e-juridic.manager.ro or dinulawyers.ro, which underline that the tax authority should first show that the company has no assets that can realistically be enforced before turning to directors or other persons.

4.2. Existence of an unlawful act or omission attributable to the director

Article 25 paragraph (2) letters b–e refer to specific conducts by directors or other persons, for example:

• transferring or concealing assets of the company, in bad faith, thereby causing its insolvency;
• failing to file for insolvency in time, although the conditions were clearly met;
• causing the non-declaration or non-payment of tax liabilities when due;
• causing the reimbursement or refund of amounts unduly received from the budget.

Specialised literature stresses that, to engage liability, it is not enough that someone was a director “on paper”; the tax authority must prove actual involvement in those acts or omissions. Detailed analyses can be found on websites such as fiscalitatea.ro or albusel.ro.

4.3. Bad faith and causal link

Another central element is the director’s bad faith and the causal link between their conduct and the non-payment of tax liabilities. Bad faith generally implies that the person:

• was aware of the company’s real situation (debts, lack of resources, duty to declare and pay taxes);
• foresaw the adverse outcome (non-payment of taxes, insolvency) and accepted or pursued such outcome;
• continued to carry out transactions or take decisions that aggravated the company’s tax position.

Without evidence of bad faith and causation, joint and several liability should not be imposed. Case-law emphasises that the mere existence of tax debts or the director’s failure to successfully rescue the company is not enough; the tax authority must show that the director caused non-declaration, non-payment or insolvency, intentionally or at least accepting that result. Summaries of relevant decisions may be found on jurisprudenta.com and avocatstoean.ro.

4.4. The period for which liability is engaged

Article 25 paragraph (5) expressly provides that the liability of the persons concerned covers main tax liabilities and accessories for the period during which they had the status that triggers liability. In other words, a director should not be held liable for periods when:

• they had not yet been appointed (before registration of the director’s mandate);
• they had resigned or been dismissed, properly notified and recorded with the Trade Registry;
• they had no actual powers or role in managing the company, even though in practice tax authorities sometimes overlook this, requiring clarification in court.

5. ANAF procedure for establishing joint and several liability

The conditions in Article 25 FPC are supplemented by a specific administrative procedure adopted by ANAF and published on legislatie.just.ro. This procedure describes, step by step, how the tax authority assesses the situation and decides whether or not to issue a joint and several liability decision.

5.1. Who initiates the procedure and when?

The measure is initiated by the tax authority competent to carry out enforcement against the main debtor, usually after ascertaining that the company cannot pay its tax debts and has been declared insolvent for tax purposes. At this stage, the authority:

• checks the company’s tax records and accounting documents;
• analyses significant transactions (sale of assets, transfers to related companies, preferential payments);
• identifies persons who held director or management positions during the relevant period.

Useful summaries of these procedural steps are provided on blog.ilegis.ro and CECCAR Arad.

5.2. The right to be heard

Before issuing a joint and several liability decision, the tax authority must, under Article 9 of the Fiscal Procedure Code and the special procedure, ensure that the person concerned is granted the right to be heard. In practice, this means that:

• the person is notified and invited to an interview or hearing;
• they are allowed to examine the file on liability and see the documents on which ANAF intends to rely;
• they may submit objections, explanations and documents (for example, evidence that they were not a director during the relevant period, that they filed in time for insolvency, that they contested the tax insolvency report, etc.);
• they may be assisted by a lawyer or tax consultant.

This right is detailed in the procedure published on legislatie.just.ro, and is important if the decision is later challenged: failure to properly hear the person or merely formal compliance with this step may be grounds for annulment.

5.3. The report and the decision establishing joint and several liability

If, further to its checks, the tax authority considers that the legal conditions are met, it draws up a report on the opportunity to initiate the procedure for joint and several liability. This report is approved by the head of the authority and forms the basis for issuing the decision.

Under Article 26 FPC and the special procedure, the decision on joint and several liability must include, inter alia:

• identification data of the main debtor and of the person held liable;
• the nature and amount of the sums for which liability is engaged;
• a description of the imputable acts and of the link between those acts and the outstanding tax liabilities;
• the legal basis (Article 25 paragraphs (2), (2¹) or (3), as applicable);
• arguments on bad faith and causation;
• the payment deadline and information on appeal possibilities.

The decision is a tax administrative act and constitutes a tax assessment title against the director, which may be enforced if not appealed in time, and not suspended or annulled.

5.4. Service of the decision and immediate effects

The decision is served under the general rules in the Fiscal Procedure Code (Articles 47 et seq.), by mail at the person’s tax domicile, by electronic means or by posting in specific circumstances. As from the date of service:

• the 45-day time limit starts to run for filing an administrative appeal (Articles 268 and 270 FPC);
• the payment deadline set in the decision starts;
• the tax authority may adopt protective measures (garnishments, seizures) under Article 213 FPC.

Articles and commentaries on websites such as indrumari-juridice.eu, rcp-legal.ro or dinulawyers.ro stress how important it is for the director to react quickly, request access to the file and prepare a defence, rather than ignore the decision.

6. How directors can defend themselves: administrative appeal and court action

The person targeted by a joint and several liability decision has access to a two-level defence:

• an administrative appeal lodged with the issuing tax authority; and
• a court action in administrative and tax litigation before the competent court.

6.1. Administrative appeal (45-day deadline)

Articles 268 and 270 of the Fiscal Procedure Code set out the general framework for appeals against tax administrative acts. Within 45 days from the date of service of the decision, the person concerned may lodge an administrative appeal with the issuing authority. This deadline is a forfeiture period, as confirmed by case-law and doctrinal commentaries published, for example, on fiscalitatea.ro and petrea.eu.

The appeal may invoke arguments such as:

• the absence of, or flaws in, the company’s tax insolvency report;
• non-fulfilment of the conditions in Article 25 (for example, lack of bad faith, lack of causal link);
• an incorrect period of liability (the director no longer held that position, had resigned, etc.);
• breach of the hearing procedure; lack of proper reasoning for the decision;
• errors in the calculation of amounts or in identifying the tax liabilities for which liability is engaged.

6.2. Court action: challenging the decision in administrative and tax litigation

After the administrative appeal is decided, the taxpayer may bring a court action seeking annulment of the joint and several liability decision, under Law no. 554/2004 on administrative litigation. The competent court is usually the tribunal, administrative and tax litigation section, and the procedure follows the general rules of tax litigation.

In practice, courts tend to scrutinise carefully:

• whether the tax authority proved the concrete acts imputed to the director;
• whether the bad faith required by Article 25 paragraph (2) FPC is present;
• whether there is a genuine causal link between the alleged conduct and the debtor’s insolvency or non-payment of taxes;
• whether the decision is sufficiently reasoned and whether procedural safeguards (hearing, statement of reasons, clear legal basis) were respected.

On portals such as jurisprudenta.com and avocatstoean.ro you can find cases where courts annulled joint and several liability decisions due to failure to prove bad faith, lack of causation, incorrect delimitation of the period of liability or breach of defence rights.

6.3. Suspension of enforcement

The administrative appeal does not automatically suspend enforcement of the joint and several liability decision. To prevent garnishments and other enforcement measures, the director may:

• apply for suspension under specific tax procedures (for example, by offering guarantees, depending on the circumstances);
• file a separate court action for suspension of enforcement of the tax administrative act, under Articles 14–15 of Law no. 554/2004, by showing a prima facie case and imminent damage.

These mechanisms are analysed in detail in specialist articles, including on consultantavocat.ro and legal-land.ro.

7. Relationship between tax joint and several liability and insolvency (Law 85/2014)

In practice, directors’ joint and several liability for tax debts often intersects with corporate insolvency proceedings, governed by Law no. 85/2014. Two separate levels must be distinguished:

• tax joint and several liability, regulated by the Fiscal Procedure Code and initiated by the tax authority through an administrative decision; and
• the insolvency liability action against directors, shareholders or other persons, under Article 169 of Law no. 85/2014, brought by the insolvency administrator/liquidator or by creditors and decided by the insolvency judge.

Article 25 paragraph (2) letter c) FPC expressly links joint and several liability to the director’s duty to file for insolvency within the deadline laid down in Article 66 of Law no. 85/2014, i.e. 30 days from the onset of insolvency. Failure to comply with this deadline may be relied on both by the tax authority (for joint and several liability) and by the insolvency court (for the patrimonial liability action).

Commentaries on this obligation and its consequences can be found, for example, on consultantavocat.ro and rcp-legal.ro.

Importantly, tax joint and several liability and insolvency liability do not exclude each other, but they should be coordinated so as to avoid double recovery for the same debt. Amounts recovered under one mechanism must be reflected in the other, in accordance with the rules on extinguishing and accounting for tax and insolvency claims.

8. Practical examples from practice and case-law (simplified)

Without reproducing full cases, we can outline several recurring patterns reflected in doctrine and case-law (summarised on jurisprudenta.com, avocatstoean.ro and various practice-oriented articles):

8.1. Asset transfers and “emptying” of the company

A company with substantial tax arrears quickly transfers its main assets (machinery, real estate, stocks) to another company controlled by the same director or by their relatives. After these transfers, the original company is left with virtually no enforceable assets and is declared insolvent for tax purposes.

In such a scenario, the tax authority may argue that the director caused insolvency by transferring assets in bad faith (Article 25 paragraph (2) letter b) FPC) and may issue a joint and several liability decision for the remaining tax debts. Courts have upheld this approach in multiple cases where the evidence (contracts, clearly undervalued prices, links between companies) demonstrated the fraudulent character of the transactions.

8.2. Late filing for insolvency and accumulation of debts

The director of a company becomes aware from financial statements and cash-flow projections that the company can no longer pay its certain, liquid and due debts, but postpones for many months the filing for insolvency, hoping for a turnaround. During this period the company accumulates additional tax liabilities, which are not declared or are declared but not paid.

In such cases, the tax authority may reproach the director both for failure to file for insolvency within the legal time limit (Article 25 paragraph (2) letter c) FPC in conjunction with Article 66 of Law 85/2014) and for causing non-declaration/non-payment of tax liabilities (Article 25 paragraph (2) letter d). Courts, however, require clear proof of the date when insolvency occurred and of the director’s actual decisions during that period.

8.3. “Nominee director” versus de facto director

It is not unusual for someone to accept to be a “nominee director” (for example, at the request of a friend or family member), without real involvement in managing the company. However, before the tax authority and the courts, simply stating this is not enough.

Courts have repeatedly held that the de jure director, registered with the Trade Registry, carries a presumption of responsibility because they sign acts, file tax returns and represent the company. To avoid liability, the person must concretely prove that:

• they had no access to the company’s documents and decisions;
• they were de facto excluded from management;
• they resigned and notified their resignation, even if the majority shareholder failed to update registration with the authorities.

8.4. Cases where courts annul joint and several liability decisions

On the other hand, there are numerous cases in which courts have annulled joint and several liability decisions because:

• the tax authority failed to prove bad faith;
• no causal link between the alleged conduct and insolvency/non-payment of taxes was demonstrated;
• the decision lacked proper reasoning and merely reproduced statutory wording;
• the procedural requirements on hearing and service were breached.

Case summaries and commentary on such decisions can be found on Legal Land, indrumari-juridice.eu and mbo-legal.ro.

9. Practical consequences for the individual

A joint and several liability decision is not just a “theoretical” tax document. It has immediate and concrete effects on the individual’s personal assets:

• the tax authority may initiate enforcement against the individual’s personal bank accounts, salary and other income;
• movable and immovable assets (cars, real estate) owned by the director may be seized and sold;
• protective measures (garnishments, seizures) may affect access to finance, banking relationships and creditworthiness;
• in complex cases, there may be additional reporting consequences (for example, with banks or other authorities).

Moreover, in parallel with tax liability, the conduct imputed to the director (for example hiding assets, not declaring income, obtaining undue refunds) may also constitute criminal offences (tax evasion, fraudulent bankruptcy, etc.), triggering criminal liability. The relationship between tax liability and criminal liability is analysed, for instance, on dreptclar.ro and avocatpavel.ro.

10. Preventive recommendations for directors

Even though joint and several liability is an exceptional measure, the risk is serious enough to justify a proactive approach by company directors:

• Monitor the tax situation closely: regularly check tax balances in the ANAF Private Virtual Space and maintain a close dialogue with the accountant;
• Respect declaration and payment deadlines: even if payment is difficult, it is crucial to declare liabilities correctly and on time, to avoid suspicions of intentional non-declaration;
• Avoid suspicious asset transfers: sales at clearly under-market prices to related parties, unexplained stock transfers and similar operations may later be characterised as attempts to “empty” the company;
• Document management decisions: board minutes, financial analyses, correspondence with banks and creditors may later help demonstrate good faith;
• Comply with the duty to file for insolvency once the conditions under Law 85/2014 are met; postponing indefinitely may be interpreted as bad faith;
• Seek legal or tax advice early, as soon as significant payment difficulties or discussions with ANAF about potential joint and several liability arise.

In addition, directors should be very cautious about accepting to be “nominee directors”. From a tax law perspective, merely being registered as director in the Trade Registry and signing tax returns and financial statements is sufficient to make you a prime target for a joint and several liability procedure if problems arise.