Director’s Liability for Corporate Losses: New Supreme Court Approaches

Ukrainian judicial practice in disputes involving the liability of directors and other corporate officers has changed significantly in recent years. Whereas such disputes were previously often treated as extensions of labour conflicts or internal corporate disagreements, the Supreme Court is now effectively developing a separate model of fiduciary liability owed by corporate officers to the company itself.

The core approach already appears well established: disputes between a legal entity and its corporate officer regarding compensation for damages fall within the jurisdiction of commercial courts. Moreover, the existence of an employment relationship between the company and the director does not affect the determination of jurisdiction. This position was formulated by the Grand Chamber of the Supreme Court, including in cases No. 638/15118/16-ц dated December 11, 2019, and April 14, 2020.

The Supreme Court has also made it clear that liability does not automatically end once the officer leaves office. In case No. Б15/101-08, the Grand Chamber held that an insolvency administrator acting as a liquidator performs the functions of a governing body of the legal entity and therefore may remain a defendant in a damages claim even after termination of those powers.

At the same time, the very concept of unlawful conduct by a director has evolved far beyond formal excess of authority.

In its ruling of December 4, 2018, in case No. 910/21493/17, the Commercial Cassation Court articulated one of the foundational positions for this category of disputes. The Court stated that unlawful conduct may consist not only of direct violations of law or corporate charter provisions, but also of bad-faith actions exceeding the limits of reasonable business risk, decisions driven by personal interest, or obviously reckless and wasteful conduct.

This line of reasoning became the basis for further development of the concept of fiduciary duties of directors.

In case No. 905/1575/20, the Supreme Court expressly held that a company director owes duties of care and loyalty to the company and benefits from a presumption of good faith. However, once a shareholder rebuts that presumption under at least one criterion, the burden shifts to the director to prove that their actions were reasonable and taken in the company’s best interests. 

In practice, this significantly changes the balance in corporate disputes. Courts increasingly assess not only the formal legality of a director’s conduct, but also its economic rationale, good faith, and consistency with the company’s interests.

A particularly illustrative example is case No. 910/20261/16 concerning the re-registration of a subsoil use permit. The Supreme Court found that the director approved the transfer of the permit to another company whose ultimate beneficial owner was the director himself. As a result, the company lost a valuable economic asset. The Court confirmed the existence of a causal link between the director’s conduct and the company’s losses.

Another notable category of disputes concerns executive bonuses.

In case No. 911/3853/23, the Supreme Court reviewed a situation where the acting chairman of the management board issued bonus payments based on a supervisory board decision adopted without a proper quorum. The Court stated that a corporate officer, while fulfilling fiduciary duties, should at least have identified the obvious defects of such a decision. As a result, the Court recognised losses suffered by the joint-stock company due to unlawful withdrawal of funds.

At the same time, Supreme Court practice does not amount to automatic liability of directors in every corporate dispute.

The courts consistently emphasise that recovery of damages requires proof of all elements of a civil offense: unlawful conduct, damages, causation, and fault. Absence of any one of these elements excludes liability. This position was reaffirmed, among others, in case No. 910/5100/19.

This approach is especially visible in claims for lost profits.

For example, in case No. 918/1131/20, the Supreme Court stressed that merely alleging potential losses is insufficient. The claimant must prove a real possibility of obtaining the expected income and provide precise and substantiated calculations. Hypothetical assumptions or abstract estimates are not accepted by the courts. 

Court practice also demonstrates a relatively flexible approach to fault.

In case No. 904/982/19, the Supreme Court considered a situation involving erroneous tax payments made by a company director. The Court characterised the conduct as negligence but simultaneously took into account the absence of personal interest and the company’s own failure to timely identify the error. As a result, the amount of recoverable damages was reduced to 10% of the claimed losses.

Another important trend is the gradual expansion of the very boundaries of liability.

In 2025, in case No. 910/4707/21, the Commercial Cassation Court expressly held that the obligation to compensate damages caused by a corporate officer may pass to heirs within the value of inherited property.

All of this demonstrates the gradual formation in Ukraine of a much stricter model of corporate officer liability. Directors and board members are increasingly viewed not as ordinary employees, but as individuals bearing an independent obligation to act in good faith, reasonably, and exclusively in the interests of the legal entity.