October 25, 2019

Correlatoion of civil and labor (disciplinary) responsibility of the head of the executive body of a legal entity, the grounds and procedure for bringing to responsibility.

1. Grounds for bringing to responsibility

2. Procedure for bringing to responsibility

3. Statute of limitations period

1. Grounds for bringing to responsibility
The head of the company is responsible to her both within the framework of labor relations and in accordance with the general rules of civil legislation. When performing his duties, a member of the executive body of the LLP (hereinafter referred to as the Director) must act in the interests of the partnership in good faith and reasonably. The Director of the LLP may be held liable at the request of any of the participants of the partnership for damages caused by them to the partnership, as well as to subsidiary liability with the partnership to third parties for losses that these persons suffered as a result of the insolvency (bankruptcy) of the partnership caused by improper management of the partnership by the Director.

Employment relations with the Director of the LLP are carried out in accordance with the Labor Code of the Republic of Kazakhstan, the laws of the Republic of Kazakhstan, the constituent documents and the employment contract. The party to the employment contract that caused damage (harm) to the other party compensates it in accordance with the Labor Code and other laws of the Republic of Kazakhstan (Civil Code of the Republic of Kazakhstan).

Termination of the employment contract after causing damage (harm) does not entail the release of the party to the employment contract from material liability for compensation for the damage (harm) caused to the other party (i.e., even if the manager resigns, his obligation to compensate for harm will not be affected).

The material liability of the party to the employment contract for the damage (harm) caused by it to the other party to the employment contract occurs for the damage (harm) caused as a result of the culpable illegal behavior (action or omission) and the causal relationship between the culpable illegal behavior and the damage (harm) caused.

The employee is financially responsible to the employer:

— for damage caused by loss or damage to the employer’s property;

— for damage caused as a result of an employee’s action (inaction).

The employee is obliged to compensate for the direct actual damage caused to the employer.

Direct actual damage is understood as a real decrease in the employer’s available property or deterioration of the condition of the specified property (including the property of third parties held by the employer, if the employer is responsible for the safety of this property), as well as the need for the employer to make costs or excessive payments for the acquisition or restoration of property. According to the party of the employment contract, who caused damage (harm) to the other party, compensates it in the amounts established by the Labor Code of the Republic of Kazakhstan and the laws of the Republic of Kazakhstan, on the basis of a court decision or on a voluntary basis.

It is possible to bring the head of the LLP to financial responsibility on the basis of the following norms:

Paragraph 3 of Article 21 of the Labor Code of the Republic of Kazakhstan:

“3. Labor relations with the head of the executive body of a legal entity are carried out in accordance with this Code, the laws of the Republic of Kazakhstan, the constituent documents and the employment contract.”

p.p. 2, 4st. 120 of the Labor Code of the Republic of Kazakhstan:

“2. A party to an employment contract that has caused damage (harm) to the other party shall compensate it in accordance with this Code and other laws of the Republic of Kazakhstan.

4. Termination of the employment contract after causing damage (harm) does not entail the release of the party to the employment contract from material liability for compensation for the damage (harm) caused to the other party.”

p.p. 3, 4st. 123 of the Labor Code of the Republic of Kazakhstan:

“3. The employee is obliged to compensate for the direct actual damage caused to the employer.

4. Direct actual damage is understood as a real reduction in the employer’s available property or deterioration of the condition of the specified property (including the property of third parties held by the employer, if the employer is responsible for the safety of this property), as well as the need for the employer to make costs or excessive payments for the acquisition or restoration of property.

Item 3; Item 4 of Article 52 of the Law of the Republic of Kazakhstan “On Limited and Additional Liability partnerships”:

“3. Members of the executive body of a limited liability partnership may be held liable at the request of any of the participants of the partnership for damages caused by them to the partnership. At the same time, they are jointly and severally liable for losses caused by their joint improper management of the partnership.

4. Members of the executive body of a limited liability partnership may be jointly and severally held liable to third parties with the partnership for losses incurred by these persons as a result of the insolvency (bankruptcy) of the partnership caused by improper implementation by members of the executive body of the management of the partnership.”

Articles 5, 6 of the Law of the Republic of Kazakhstan “On rehabilitation and Bankruptcy”

5. The basis for the creditor’s application to the court for declaring the debtor bankrupt or applying a rehabilitation procedure is the debtor’s insolvency. The founder (participant) and (or) officials of the debtor bear subsidiary liability to the creditors of the insolvent debtor with their property for intentional bankruptcy.

6. The official of the bankrupt compensates the losses to the owner of his property for intentionally bringing the debtor to insolvency.

2. Procedure for bringing to responsibility

All disputes arising from labor relations are subject to settlement out of court and in court. An appeal to the conciliation commission on a dispute that has arisen between an employee and an employer in connection with causing material damage is mandatory.

This follows from the meaning and interpretation of paragraphs 1 and 2 of Article 159 of the Labor Code of the Republic of Kazakhstan, which states that “the employer has the right: 12) to apply for the resolution of an individual labor dispute successively to the conciliation commission, the court in the manner provided for by this Code.”

The position of the Supreme Judicial Body of the country is expressed more specifically and definitely on this issue in paragraph 3 of the NP of the Supreme Court of the Republic of Kazakhstan dated October 6, 2017. It states that the Supreme Court of the Republic of Kazakhstan decides to give the following explanation: “according to Article 159 of the Labor Code, the appeal of employees or persons who previously had an employment relationship, or an employer to the conciliation commission is a mandatory stage of the pre-trial settlement of an individual labor dispute that has arisen between them.

If a party to an individual labor dispute does not agree with the decision of the conciliation commission in whole or in part, the dispute is considered unresolved, and the party who does not agree with the decision of the conciliation commission, as in the case of non-fulfillment of the decision of the conciliation commission, has the right to apply to the court for a resolution of the labor dispute.”

In court, the dispute is considered by the general civil court according to the general rules of claim proceedings (subsection 2 of the CPC RK). The dispute cannot be considered in a simplified (written) order, since cases are considered in this order, the list of which is provided for in Article 145 of the CPC of the Republic of Kazakhstan. Depending on the decision taken by the conciliation commission, the subject and the basis of the claim are determined.

The norms of substantive law (the Law of the Republic of Kazakhstan dated April 22, 1998 No. 220-I “On Limited and Additional Liability Partnerships” and the Civil Code) do not regulate the legal grounds for compensation for damage caused to the partnership by its sole head of the executive body, as well as civil procedure legislation does not contain any special procedure or special order consideration of civil cases of this category. The initiator of bringing to responsibility the head of the executive body or other management body of the partnership may be a participant (participants). At the same time, the current legislation does not provide for any requirements for participants regarding the amount of the share in the authorized capital of the partnership.

At the same time, the partnership itself has the right to apply to the court with a claim for damages caused to the partnership by the sole executive body, a member of the collegial executive body of the partnership, a managing organization or a manager.

3. Statute of limitations period

Bringing the director to responsibility within the framework of labor relations is possible within one year from the day when the employee or employer learned or should have learned about the violation of his right (paragraph 2 of Article 160 of the Labor Code of the Republic of Kazakhstan).

For civil liability, in general, a three-year limitation period is applied (clause 1 of Article 178 of the Civil Code of the Republic of Kazakhstan).