Court of Appeal: former head of Kėdainių aruodai not responsible for company losses

The Lithuanian Court of Appeal upheld the first instance court ruling in a precedent-setting case concerning damages related to company losses. The Court of Appeal dismissed the appeal and ordered Kėdainių aruodai to pay the litigation costs. On 30 October 2019, the court decided in a final ruling that potential loss-making business transactions do not automatically mean that the manager had committed unlawful acts in the sense of civil liability.

We successfully represented Valdas Šarūnas, a former manager of Kėdainių aruodai, in court.

Claimed more than EUR 1 million in first instance court

Kėdainių aruodai blamed former manager Valdas Šarūnas for a bad harvest and related losses and claimed more than EUR 1 million in the Kaunas Regional Court. On 11 October 2018 the Court rejected the civil claim and ordered payment of almost EUR 15,000 of litigation costs. However, the claimant appealed against the judgment.

Strengthened legal distinction between responsibility of legal entity and its manager

Comments Sorainen partner attorney-at-law Laurynas Lukošiūnas, who represented the former head of the company: “The case is quite unique and significant as Kėdainių aruodai was trying to form new case law and to prove a manager’s personal liability for loss suffered by a legal entity. The claimant asserted that the company manager should be liable for the entire loss suffered by the company, regardless of the reasons for loss. If such a precedent were to be set, it would eliminate the legal distinction between the responsibility of a legal entity and its manager, which would greatly complicate doing business in Lithuania. Working as a professional hired manager would carry immeasurable risk.”

Adds Laurynas: “We are pleased that the Lithuanian Court of Appeal made a rational decision assessing the objective causes of the losses and noted that Kėdainių aruodai had been operating very profitably for many years under the direction of the same accused manager. It is understandable that business entities do not distribute all profits to hired managers, and it would be unwise to claim compensation from the same managers when the business does not develop as successfully as shareholders expect for a certain period of time”.

Our team

Sorainen partner, attorney-at-law Laurynas Lukošiūnas, and associate Greta Kubiliūnaitė worked on the case and represented the client in court.