European Court of Human Rights

 

 

FOURTH SECTION

 

 

 

 

 

 

 

 

 

CASE OF LEKIĆ v. SLOVENIA

 

(Application no. 36480/07)

 

 

 

 

 

 

 

 

 

 

JUDGMENT

 

 

 

STRASBOURG

 

 

14 February 2017

 

 

 

This judgment will become final in the circumstances set out in Article 44 § 2 of the Convention. It may be subject to editorial revision.




In the case of Lekić v. Slovenia,

The European Court of Human Rights (Fourth Section), sitting as a Chamber composed of:

          András Sajó, President,
          Vincent A. De Gaetano,
          Nona Tsotsoria,
          Paulo Pinto de Albuquerque,
          Iulia Motoc,
          Gabriele Kucsko-Stadlmayer, judges,
          Boštjan Zalar, ad hoc judge,
and Marialena Tsirli, Section Registrar,

Having deliberated in private on 24 January 2017,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1.  The case originated in an application (no. 36480/07) against the Republic of Slovenia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by Mr Ljubomir Lekić. He was represented before the Court by Mr S. Zdolšek, a lawyer practising in Ljubljana.

2.  The Slovenian Government (“the Government”) were represented by their Agent, Mrs B. Jovin Hrastnik, State Attorney.

3.  The applicant alleged, in particular, that the striking off of company L.E. from the court register had constituted a disproportionate interference with his right to peaceful enjoyment of his possessions, as it had meant that the company in which he was a shareholder had ceased to exist. Furthermore, he had become personally liable for the company’s debts.

4.  On 28 November 2012 the application was communicated to the Government. Mr Marko Bošnjak, the judge elected in respect of Slovenia, was unable to sit in the case (Rule 28 of the Rules of Court). Accordingly, the President of the Fourth Section decided to appoint Mr Boštjan Zalar to sit as an ad hoc judge (Article 26 § 4 of the Convention and Rule 29 § 1).

THE FACTS

I.  THE CIRCUMSTANCES OF THE CASE

5.  The applicant was born in 1956 and lives in Ljubljana.

A.  The applicant’s position in company L.E.

6.  On 8 October 1992 the applicant acquired a share in L.E., a limited liability company based in Ljubljana. His name was entered in the court register of legal entities (hereinafter “the court register”) and he became one of nine equal registered members of the company, each holding an 11.11% share. The share capital of L.E. stood at 2,995,250 Slovenian tolars (SIT) (12,498.96 euros (EUR)).

7.  Two of the founding members withdrew from company L.E. at the beginning of 1993. On 2 February 1993 the applicant, in addition to being a member, was also employed by company L.E. as head of its IT department. In addition, he provided assistance to the finance director.

8.  On 19 February 1993 two key members and managers of company L.E. died in a car accident and two others were seriously injured. As a result, the company’s business operations could not be carried out and the company sustained a large financial loss. Moreover, its management was seriously undermined and during the course of 1993 all members except the applicant and another person withdrew from the company’s management board. Following those events, the applicant first assumed the role of acting director of company L.E. on 29 April 1993, and then the role of managing director on 23 February 1995. In that capacity he acted as the company’s representative.

9.  Meanwhile, on 24 August 1993, the Railway Company of Slovenia (Slovenske železnice) had applied for an enforcement order against L.E. based on an authentic document for unpaid transport services. L.E. challenged the enforcement order and the parties were directed to settle the issue in contentious proceedings. The Railway Company lodged a civil action, claiming the payment of three sums totalling approximately SIT 5,000,000 (EUR 20,000).

10.  In 1995, L.E. was converted into a limited liability company in accordance with section 580 of the Companies Act, which required companies falling under its jurisdiction to increase their share capital and to align their operations with the provisions of the Act (see paragraph 34 below). However, at the time of the conversion the company was no longer liquid or solvent.

11.  On 6 May 1996 the applicant stepped down as managing director of L.E. following a decision of the general meeting of the company. The members failed to appoint a new managing director and henceforth the company existed without any management. The applicant’s resignation from the post of managing director was not entered in the court register of legal entities (hereinafter “the court register”).

12.  On 19 June 1997 the members of company L.E. decided at its general meeting to apply for bankruptcy on account of the company’s insolvency. L.E. filed a bankruptcy petition with the competent court, but it was rejected as the company had failed to make the required advance payment to cover costs and expenses of the bankruptcy proceedings in the amount of SIT 150,000 (EUR 626). The members established that they could not incur the costs of bankruptcy and thus decided to wait for the courts to liquidate the company proprio motu, in accordance with the then applicable legislation, namely, the Compulsory Composition, Bankruptcy and Winding-Up Act as amended, which entered into force on 1 July 1997. The amendment to the Act authorised the courts to initiate bankruptcy proceedings of their own motion in certain specified circumstances (see paragraph 34 below).

13.  On 31 July 1997 the applicant stopped working for company L.E. Moreover, by the end of 2000, another two members of the company had died.

14.  In the civil proceedings initiated by the Railway Company against L.E. the applicant was summoned to appear at a hearing to be held on 22 November 2000. As he was unable to attend the hearing, he made written submissions explaining that the company had not been solvent for a number of years. On 22 November 2000 the District Court of Ljubljana rendered a judgment ordering L.E. to pay the Railway Company the three sums claimed.

B.  The strike-off proceedings against company L.E.

15.  Meanwhile, on 1 July 1999 the Compulsory Composition, Bankruptcy and Winding up Act was again amended, inter alia, to repeal the provisions on bankruptcy proprio motu. Moreover, on 23 July 1999 the Financial Operations of Companies Act (hereinafter “the FOCA”) entered into force. It introduced a measure decided proprio motu whereby insolvent and/or inactive companies were struck off from the court register without winding up. Thus those companies could be dissolved without the prior procedure of disposing of their assets and repaying - to the extent possible - their creditors. However, in order to ensure that creditors of struck-off companies were protected, the FOCA provided that the members of those companies would assume joint and several liability for the former companies’ debts.

16.  On the basis of a notification from the Agency for Public Legal Records and Related Services that company L.E. had not performed any transactions through its bank account in a period of twelve consecutive months, on 19 January 2001 the Ljubljana District Court, acting in its capacity as the registry court, initiated proceedings to strike off the company from the court register.

17.  On that day, the decision to initiate strike-off proceedings was entered in the court register and an unsuccessful attempt was made to serve it on the company at its registered office. The document was sent to the address of the company, but since no representative of the company was there to receive it, a delivery slip was left in its mailbox, informing the company that the relevant correspondence could be collected at the post office. On 12 February 2001 the document was returned to the registry court with the information that the addressee had failed to collect it. The registry court then served it by posting it on its notice board, as provided for by the Court Register of Legal Entities Act. According to the applicant, company L.E. had ceased to operate at the address of its registered office already in 1997 and had not been present at those or any other premises since. Moreover, there were no mailboxes at the office building at issue and all mail would have been left at the reception desk.

18.  No objection was made to the decision to initiate strike-off proceedings either by company L.E. or by its members. Consequently, on 11 May 2001 the registry court issued a decision to strike off company L.E. from the court register. The decision was published in the Official Gazette on 30 May 2001. The registry court also attempted to serve the decision on company L.E. by sending it to the company’s address, but like the previous document it was returned on 4 June 2001 with the information that the addressee had failed to collect it. Again, the decision was posted on the registry court’s notice board. Neither company L.E. nor any of its members, who were entitled to lodge an appeal against the strike-off decision, appealed against the decision, so on 17 August 2001 it became final.

19.  On 25 September 2001 company L.E. was struck off from the court register and thus ceased to exist. Notification of the strike-off was published in the Official Gazette on 6 February 2002.

20.  The applicant stated that he had become aware that L.E. had been struck off from the court register on 22 December 2004, when an enforcement order was served on him for seizure of his property.

C.  Enforcement proceedings against the applicant

21.  Meanwhile, based on the judgment ordering L.E. to pay the Railway Company approximately EUR 20,000 (see paragraph 9 above), on 5 April 2002 the creditor lodged an application for enforcement with the Ljubljana Local Court against seven members of the company.

22.  On 5 June 2002 the Ljubljana Local Court granted the creditor an enforcement order to seize the applicant’s personal possessions, which was later expanded to include his salary.

23.  On 29 December 2004 the applicant lodged an objection to the enforcement order, arguing that the local court had failed to establish his actual role in company L.E. and to acknowledge his status of an “inactive member” (see paragraphs 48-49 below), which would have exonerated him from liability for the company’s debts. He maintained that the creditor’s claim against the company had arisen before he had joined it, and that he had only become involved in the management of the company because the two members who had previously performed that role had died. Moreover, the applicant was of the view that the onus rested on the creditor to establish that he had been an active member of the company, and that the matter should be examined in contentious civil proceedings. Lastly, he applied for a stay of enforcement.

24.  On 12 March 2005 the applicant’s objection was dismissed. The Local Court found that the onus of proving his inactive status was on the applicant, and that he had failed to prove that he had not been an active member of L.E. The Local Court established that with his 11.11% share in the company, the applicant had enjoyed the rights of a minority member, and furthermore, he had been employed by the company and actively involved in its management since April 1993. In his capacity as acting director and later managing director, he had been authorised to act on behalf of the company. Moreover, even after the applicant had resigned as managing director, he had still been active in the operations of the company and had also signed the bankruptcy petition. The Local Court further dismissed the applicant’s request for a stay of enforcement, as he had failed to demonstrate that the enforcement would have caused him irreparable or serious damage. The applicant appealed against that decision, reiterating the arguments he had raised in the objection to the enforcement order.

25.  On 6 May 2005 the applicant attended a hearing with regard to an objection to the enforcement order raised by D.P., another member of company L.E.

26.  On 9 February 2006 the Higher Court of Ljubljana dismissed the applicant’s appeal on essentially the same grounds as the first-instance court, and the enforcement order thus became final. The court noted, inter alia, that the Constitutional Court had found the measure of “lifting the corporate veil” under the applicable Financial Operations of Companies Act to be in accordance with the principle of separation of a company’s assets from those of its member, and thus consistent with the Constitution. The Higher Court considered it irrelevant whether the applicant had become a member of L.E. before or after the creditor’s claim had arisen. Having joined the company, he had assumed its assets as well as its liabilities, and moreover, he had had the rights of a minority member. The Higher Court placed considerable emphasis on the fact that the applicant had been actively involved in the management of the company. It explained that the reasons for lifting the corporate veil under the FOCA were not identical to those provided for in the Companies Act. The FOCA established a non-rebuttable presumption that members of inactive companies intended to have the companies dissolved and, to that end, made it clear that they assumed joint and several liability for their outstanding debts (see paragraph 41 below).

27.  On 5 May 2006 the applicant lodged two constitutional complaints before the Constitutional Court, one concerning the strike-off proceedings and the other the enforcement proceedings.

28.  On 31 January 2007 the Constitutional Court rejected the applicant’s complaint regarding the strike-off proceedings. The decision was served on the applicant on 5 February 2007. The court observed that the applicant lacked legal interest in challenging the decision of the registry court, as company L.E. had already been struck off from the court register. Therefore, even a positive outcome of the constitutional complaint could not improve the applicant’s legal position. On 9 July 2007 the Constitutional Court rejected also the complaint regarding the enforcement proceedings, finding that the applicant’s human rights had manifestly not been violated. Reiterating that only active members of struck-off companies could be held liable for the companies’ debts, the Constitutional Court found that the lower courts had correctly established that the applicant’s active involvement in the management of company L.E. could not exempt him from personal liability for the latter’s debts.

29.  In 2010 the enforcement order against the applicant’s salary was executed and part of each of the applicant’s monthly salaries was seized to pay off his debt. On 23 September 2011 the applicant reached an out-of-court settlement with the Railway Company and paid the agreed amount, and the application for enforcement against him was withdrawn. The proceedings against the applicant were terminated on 28 September 2011. In total, the applicant paid EUR 32,795 to his creditor.

II.  RELEVANT DOMESTIC LAW AND PRACTICE

A.  Legislation preceding the Financial Operations of Companies Act

30.  In 1988 the Undertakings Act entered into force in the former Socialist Federal Republic of Yugoslavia, providing a legal framework for the private ownership of undertakings (businesses). The Act provided that private businesses could be established by a wide range of investors with a relatively low share capital.

31.  After it became independent, Slovenia enacted, in 1993, the Companies Act which replaced the Undertakings Act in its entirety. Under that Act, a limited liability company is a company whose share capital is comprised of the subscribed contributions of its members. A company may have a maximum of fifty members and is established by a contract concluded by the members in the form of a notarial deed. Each member obtains his or her business share in proportion to his or her stake in the total share capital. Members are not liable for the obligations of the limited liability company. A company director is required to enter the company in the court register. An application for entry in the register must include, inter alia, a list of members and their shares, the company’s name, activity and registered office. Any change in the data entered in the court register must be notified to the registry court within three days.

32.  A limited liability company has one or more directors who are responsible for managing the operations of the company and representing the company. However, several important decisions regarding the management and operation of the company (such as the appointment of directors or distribution of profits) are adopted at a general meeting. Members whose business shares comprise at least one tenth of the total share capital may demand the convocation of a general meeting; in this regard, they are required to specify the issues on which the general meeting should decide, and the reasons for calling a general meeting. Moreover, such members may also request that a specific issue be included on the agenda of a general meeting that has already been called. Also, a company director is required to inform a member immediately of the company’s affairs at his or her request, and allow the member access to the company’s records and files.

33.  With regard to the dissolution of a company, the Companies Act provides that a limited liability company must be dissolved, inter alia, if it goes bankrupt or if the company’s share capital is reduced below the statutory limit or if the members decide to wind it up. Any member whose business share amounts to at least one tenth of the total share capital may lodge an action before the competent court requesting that the company be dissolved, if he or she considers that the company’s aims cannot be achieved to a sufficient degree, or if there are any other reasonable grounds for the dissolution of the company. Moreover, the members of a limited liability company may decide to dissolve the company in the so-called summary proceedings, without the winding up, if all members of the company request the registry court to strike off the company from the court register. In this event, they must attach to the application a resolution on dissolving the company by summary procedure and a statement made by all members in the form of a notary deed to the effect that all the company’s obligations have been fulfilled, that any disputes with the employees have been settled and that the members assume joint and several liability for any potential outstanding obligations of the company. Any claims against the struck-off company can be enforced against its members within one year of the publication of the strike-off notice in the court register.

34.  The Companies Act introduced important changes in the operation of companies and, inter alia, increased the minimum share capital required for the operation of limited liability companies. Existing companies were required to align themselves with the new, more constricting legislation within approximately a year and a half of the entry into force of the Act. Failing that, pursuant to section 580 of the Act companies were to be wound up and struck off the court register proprio motu, while their former members were to assume personal liability for the former companies’ debts. Subsequently, the Constitutional Court annulled the provision in part, distinguishing between members who were actively involved in the operation of a company and so-called “passive members” (decision no. U-I-135/00). In accordance with the decision of the Constitutional Court, only active former members could be held personally liable for a company’s debts (see paragraph 49 below).

35.  In 1997 the legislature responded to the problem of a high number of inactive and insolvent companies by amending the then applicable Compulsory Composition, Bankruptcy and Winding Up Act. An amendment of 1 July 1997 authorised the courts to initiate of their own motion bankruptcy proceedings against companies which had failed to pay salaries for three consecutive months, or had blocked bank accounts, or which had been illiquid (lacking liquid assets) for the preceding twelve months. Insolvent companies which themselves filed for bankruptcy were required to make an advance payment covering the costs of publishing the notice of commencement of bankruptcy proceedings in the Official Gazette. The remaining costs of bankruptcy proceedings were paid from the bankruptcy estate; if the assets constituting the bankruptcy estate were not even sufficient to cover the costs of the proceedings, the bankruptcy panel initiated bankruptcy proceedings and concluded them immediately. The provisions on bankruptcy proceedings initiated proprio motu were repealed by another amendment to the Act, which entered into force on 1 July 1999, after it had been established that such manner of dealing with inactive companies was not a feasible solution given their large number (approximately 6,000 inactive companies at the beginning of 1998) and the high costs of instituting bankruptcy proceedings which was being incurred by the State.

B.  Financial Operations of Companies Act

36.  The FOCA was enacted on 24 June 1999 and published in the Official Gazette no. 54/99 of 8 July 1999. The Act entered into force on 23 July 1999 and introduced new means of dealing with inactive and/or insolvent companies. The legislature observed that a great number of private companies were unable to meet their liabilities, thus contributing to poor financial discipline in corporate legal transactions and putting their creditors in a precarious position. Thus, the Act required companies to conduct their business in such a manner that they were able at all times to fulfil their obligations in due time (section 5). Moreover, they were required to maintain adequate capital in proportion to the volume and type of operations and activities they carried out and to the risks to which they were exposed (section 6). In this connection, the company’s management had to ensure that the company conducted its business in accordance with the law and the principles of financial operations (section 8), that it regularly monitored the risks incurred in conducting those operations and that it took appropriate measures to hedge against such risks (section 9).

37.  If a company became illiquid and thus unable to meet its maturing liabilities on time, the management had to adopt the necessary measures to re-establish liquidity and, if those measures did not bring results within the next two months, to file for bankruptcy or compulsory composition (section 12). Likewise, if a company became insolvent and its assets were no longer sufficient to meet its liabilities, the management was required to file for bankruptcy or compulsory composition within two months at the latest (section 13). If the management failed to comply with those obligations, they could be found personally liable for any damage caused to the company’s creditors as a result of such a failure. Moreover, under certain conditions, the supervisory board and the members of a company could also be found personally liable for any damage caused to the creditors.

38.  Companies that failed to follow the prescribed procedures in order to re-establish solvency or terminate their operations in cases of insolvency were to be struck off the court register proprio motu without a prior winding-up procedure, pursuant to the provisions of Chapter 3 of the FOCA. Under section 25, strike-off proceedings would be initiated if, inter alia, it could be presumed that the company in question had no assets. That was deemed to be the case if a company had made no transactions through its registered bank account for twelve consecutive months. Organisations effecting payment transactions for the company were required to inform the court responsible for maintaining the court register (the registry court) of the existence of such circumstances within a month of their onset (section 26(2)).

39.  The registry court was to commence strike-off proceedings of its own motion after establishing that the conditions for striking off the company from the register had been met. The decision on the institution of proceedings was served on the company concerned and entered in the court register (section 29). An objection could be lodged within a two-month time-limit by either the company itself, a member of the company or a creditor, on the grounds that (i) the conditions for the strike-off had been erroneously established or were incomplete; (ii) another procedure for the dissolution of the company, namely compulsory composition, bankruptcy or winding up had been initiated or applied for; or (iii) a petition for bankruptcy had been filed on behalf of the company, and advance payment had been made for the initiation of bankruptcy proceedings, or the bankruptcy petitioner had been relieved from making the advance payment (section 30).

40.  If no objection was made to the decision to commence strike-off proceedings or if such an objection had been dismissed, the registry court issued a decision to strike off the company from the court register, which was served on the company concerned and published in the Official Gazette (sections 32 and 33). An appeal against such a decision could be lodged within thirty days of its service on the company concerned or its publication in the Official Gazette by a person who had lodged an unsuccessful objection to the initiation of the strike-off proceedings, a member of the company or its creditor on the same grounds as the prior objection (section 34). If no appeal was lodged against the decision to strike off the company or if such an appeal was dismissed, the strike-off decision became final and the registry court struck off the company from the court register; a notice thereof was published in the Official Gazette (section 35).

41.  In order to ensure that the creditors of struck-off companies were protected, the FOCA provided that company members would be personally liable for outstanding debts. The Act included a non-rebuttable presumption that members of inactive and/or insolvent companies intended to have their companies dissolved, but had failed to initiate winding-up or bankruptcy proceedings. Under the applicable provisions (section 27(4) of the FOCA in conjunction with section 394(1) of the Companies Act), company members were deemed to have agreed to assuming joint and several liability for any outstanding debts of the struck-off company. The company’s creditors could pursue their claims against the members for up to a year after the publication of the strike-off notice in the Official Gazette.

42.  Due to the wide-reaching consequences of the FOCA, the provisions on measures to be taken in order to ensure that a company had adequate capital and was solvent became operational six months after the Act entered into force. The provisions of Chapter 3 regulating the strike-off procedure took effect even later. In this regard, the presumption that the company had no assets only took effect when a company had failed to make payments through its bank account for twelve consecutive months after the FOCA had entered into force, that is on 23 July 2000.

43.  In 2007, the legislature, finding that the FOCA constituted an interference with a number of principles of corporate law and was having wide-reaching and adverse effects on the position of members of struck-off companies, decided to amend the Act and relieve company members of their personal liability for their company’s debts. The Amendment to the FOCA provided that all pending judicial and administrative proceedings in which creditors of struck-off companies were enforcing their claims against members of the companies were to be terminated proprio motu. A number of creditors, whose proceedings against former members of struck-off companies were pending and who were thus about to lose all possibility of repayment, lodged a constitutional complaint challenging the new regulation. The Constitutional Court, in decision no. U-I-117/07, upheld their complaint and annulled the challenged provisions, finding that they did not afford appropriate protection to creditors.

C.  Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act

44.  On 15 January 2008 the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act was enacted to replace the Financial Operations of Companies Act. The new Act retained the possibility of striking off a company from the court register without a prior winding-up procedure, but under slightly different conditions.

45.  Subsequently, the Act on Proceedings for the Enforcement or Exoneration of Shareholders’ Liability for Corporate Obligations (hereinafter “the Shareholders’ Liability for Corporate Obligations Act”), enacted on 19 October 2011, again relieved company members from personal liability for the debts of struck-off companies. Since the legislative solutions provided for in the Act were similar to those in the Amendment to the FOCA (see paragraph 43 above), the Constitutional Court was once again called upon to decide whether the Act struck a fair balance between the interests of members of struck-off companies and the companies’ creditors. The Constitutional Court reiterated that in cases where a creditor’s claims had been recognised by a judicial decision or where the judicial proceedings were pending, as well as in cases where a creditor had not yet lodged a claim against the former members of a struck-off company but had a legitimate expectation to do so, there were no constitutionally admissible reasons for interfering with the creditor’s acquired rights. However, the court allowed exoneration for former members of companies which had been struck off from the court register after the entry into force of the Act.

D.  The Constitutional Court’s decision regarding the establishment of members’ and/or shareholders’ personal liability for the debts of a company (no. U-I-135/00)

46.  The regulation introduced by the 1999 FOCA had been challenged before the Constitutional Court by a number of former members of struck-off companies. On 9 October 2002, the Constitutional Court had dismissed the challenge in part (Decision No. U-I-135/00), holding that the measure of striking off an inactive company that had no assets was not inconsistent with the Constitution. An economically inactive company did not conduct any business operations, nor did it generate income or make payments. At the same time, its financial situation was not known to its creditors, who relied on the presumption that it had at least a minimum amount of assets. For those reasons, non-operating companies posed a threat to the security of corporate legal transactions and to the position of their creditors.

47.  The claimants had also alleged that they could not effectively protect their rights in the strike-off proceedings, as the documents on the initiation of proceedings as well as on the strike-off had not been served on them personally. In response to that argument, the Constitutional Court held that the service of documents on the company, together with a public notification in the court register of companies or in the Official Gazette, was adequate. It observed that the measure was applicable to various forms of companies, some of which belonged to a multitude of shareholders. The personal service of documents would be too time-consuming, and in certain cases impossible.

48.  As regards the personal liability of former members or shareholders, the Constitutional Court emphasised that, indeed, in principle they could legitimately expect that their liability for the company’s obligations would not exceed the value of their share. However, companies were required to ensure that they were operating with adequate share capital, and that it did not fall below the statutory minimum. Companies which operated with insufficient share capital were considerably weaker economically than those which operated in accordance with the law, which affected the security of legal transactions as a whole. Nevertheless, the Constitutional Court recognised the variety of legal and factual positions of shareholders of struck-off companies and established a distinction between so-called “active shareholders”, who were in a position to influence the operation of a company, and “passive shareholders”, who exerted no such influence. It upheld the regulation insofar as it applied to the former category, but annulled it with respect to passive shareholders. In its reasoning the Constitutional Court established the criteria which the regular courts were required to consider in deciding on the position of former shareholders. Those criteria were based on the subjective conduct of shareholders and the extent of the consequences that such conduct could have on the operation of the company, that is on their knowledge of and involvement in the management of the company.

49.  The courts deciding on the personal liability of shareholders were therefore primarily required to establish whether an individual member or shareholder had exerted influence on the respective company’s operations. They were to base their assessment on a number of criteria, notably the type of company (public limited company or a limited liability company), the status of individual shareholders (individuals or legal entities), and the internal relations between the shareholders. According to the Constitutional Court, the courts deciding on the issue of personal liability could in addition rely on the general criteria that the Companies Act determined with regard to the rule of disregarding a company’s legal personality, namely whether (i) an individual had abused the company in order to attain an objective which, as an individual, he or she should not have sought, or (ii) an individual had abused the company and thereby caused damage to its creditors, or (iii) an individual had used the assets of the company for his or her personal interests in violation of the law, or (iv) an individual had reduced the assets of the company to his or her benefit or for the benefit of another person, knowing that it would not be capable of meeting its liabilities to third parties.

THE LAW

I.  THE GOVERNMENT’S PRELIMINARY OBJECTIONS

A.  The parties’ submissions

50.  The Government objected that the present application was inadmissible, arguing that, as regards the part referring to the strike-off procedure, the applicant had failed to comply with the six-month time-limit for lodging the application. Company L.E. was struck off from the court register in 2001 and both the decision to initiate strike-off proceedings (see paragraph 16 above) and the decision to strike off the company from the court register (see paragraph 18 above) had been executed some years before the applicant lodged a constitutional complaint challenging the strike-off. Accordingly, the Constitutional Court found that the applicant’s legal position could not be improved by quashing the impugned decisions and therefore concluded that the applicant had no legal interest in challenging them (see paragraph 28 above). In the view of the Government, the six-month time-limit for lodging an application before the Court had started to run on the day on which the decision striking off the company from the court register had become final, and the fact that the applicant had lodged a constitutional complaint some years later did not extend that time-limit.

51.  Moreover, the Government observed that in the enforcement proceedings the applicant had reached an out-of-court settlement with the creditor (see paragraph 29 above). Noting that he had acknowledged the debt and paid it, the Government argued that he was no longer entitled to raise any objection to the statutory regulation imposing personal liability for the obligations of struck-off companies on their members.

52.  In their further observations, however, the Government pointed out that the complaints related to the enforcement proceedings were not part of the present application, but must have been addressed in another application referred to by the applicant of which they had not been given notice.

53.  The applicant argued out that the six-month time-limit for lodging an application before the Court ran from the date of the final decision of the domestic authorities. He was convinced that he had legitimately lodged two constitutional complaints challenging the strike-off decision and the enforcement order, respectively, at the time when he had become aware of both sets of proceedings. He emphasised that he could not have applied to the Court before he had acquired knowledge of the strike-off and his consequent personal liability, both of which had occurred three years after the strike-off. Given that one of his main complaints referred to lack of opportunity to participate in the strike-off proceedings owing to the domestic authorities’ failure to serve the relevant decisions on him, he was convinced that the Government’s objection of failure to observe the six-month time-limit could only be resolved by examining the merits of the case. As for enforcement, it was an integral part of the proceedings, and it was thus necessary to consider the strike-off and the enforcement proceedings as a whole.

54.  Moreover, as regards the out-of-court settlement, the applicant pointed out that he had not himself created the obligation to pay the creditor, but had become liable for payment as a result of the strike-off. Having regard to the fact that the creditor could seize up to two thirds of the applicant’s monthly salary, the applicant had preferred to reach a settlement agreement whereby he had paid only a share of the company’s debt proportionate to his share in the former company in the form of a lump sum. Considering that he - as well as all other members of the company - had been jointly and severally liable to pay the entire sum owed by company L.E. to the Railway Company, the applicant considered the terms of the settlement to have been favourable to him. In sum, the settlement had been merely a means of avoiding greater damage to his property.

B.  The Court’s assessment

55.  As regards the applicant’s compliance with the six-month time-limit for lodging the application, the Court reiterates that the six-month period starts running from the date on which the applicant has sufficient knowledge of the final domestic decision (see Baghli v. France, no. 34374/97, § 31, ECHR 1999-VIII, and A.N. v. Lithuania, no. 17280/08, § 77, 31 May 2016). In the present case, the Constitutional Court’s decision rejecting the applicant’s constitutional complaint was rendered on 31 January 2007 and served on the applicant on 5 February 2007. The applicant lodged his application with the Court on 4 August 2007, that is within six months from the service of the Constitutional Court’s decision.

56.  However, according to the Government, the date from which the six-month time-limit should be calculated was 17 August 2001, the day on which the decision striking off the company from the court register became final. The Court, noting that in many cases finality in the sense of res judicata does not correspond with the final domestic decision in the temporal sense, reiterates that, as regards applications against Slovenia, applicants are in principle required to lodge a constitutional complaint before applying to the Court (see Kurić and Others v. Slovenia [GC], no. 26828/06, § 296, ECHR 2012 (extracts), and the references cited therein). Also, although the Constitutional Court took the view that even if a positive decision were rendered in the applicant’s case, his legal position could not be improved (see paragraph 28 above), his constitutional complaint was not rejected as having been lodged out of time.

57.  The Government’s argument implies that a constitutional complaint should not be regarded as an effective remedy in the circumstances of the present case. However, considering that, as a rule, a constitutional complaint is regarded as an effective remedy which has to be exhausted, in the absence of clear arguments as to what alternative legal avenues, if any, the applicant had at his disposal once he had learnt of the strike-off, the Court cannot accept that the constitutional complaint should be disregarded for the purpose of calculating the six-month time-limit for lodging the application. The Court thus finds that the applicant complied with the six-month time-limit.

58.  Moreover, as regards the Government’s argument that the out-of-court settlement precluded the applicant from making any complaints with regard to his personal liability for the debts of company L.E., the Court observes that the course of action chosen by the applicant cannot be interpreted as an acknowledgment that the debt he paid was legitimately owed by him. Moreover, prior to the settlement, the applicant had used what appear to be all the domestic legal avenues available to him for the purpose of challenging his liability for the payment of the debt in question. In addition, he had lodged the present application before the Court. As explained by the applicant, the terms of the settlement were more favourable to him than the liability imposed on him by virtue of the law, and he accepted the settlement solely to avoid incurring greater damage. The Court finds that the mere fact that the applicant discharged the duty imposed on him by one of the challenged decisions does not deprive him of his victim status within the meaning of Article 34 of the Convention. Nor does it lead to the conclusion that the matter was resolved or that it is no longer justified to continue the examination of the application within the meaning of Article 37 § 1 (b) and (c) of the Convention.

59.  Lastly, as regards the scope of the application, the Court observes that, in response to the applicant’s complaint regarding personal liability for debts, the parties were invited to submit their observations on the question of whether that liability had struck a fair balance between his rights protected under Article 1 of Protocol No. 1 and the public interest. It is noted that in their observations on the admissibility and merits of the application, the Government made several references to the enforcement proceedings with regard to the facts as well as the law. Arguing that the applicant had legitimately been designated as an “active member” of the company, the Government also referred to the decisions that the domestic courts had delivered in the enforcement proceedings. Therefore, the Court will consider the enforcement proceedings in its assessment of the alleged violations in so far as the applicant’s personal liability was established in those proceedings.

60.  Given the foregoing considerations, the preliminary objections of the Government must thus be rejected.

II.  ALLEGED VIOLATION OF ARTICLE 1 OF PROTOCOL NO. 1 TO THE CONVENTION

61.  Relying on Article 1 of Protocol No. 1 to the Convention, the applicant complained that his right to the peaceful enjoyment of his possessions had been violated. He also complained, under Article 6 § 1 of the Convention, that the strike-off from the court register had not been accompanied by procedural safeguards and that his right to a fair trial had thereby been violated.

62.  Article 1 of Protocol No. 1 to the Convention provides:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

63.  Article 6 § 1 of the Convention, in so far as relevant, provides:

“1. In the determination of his civil rights and obligations ..., everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. ...”

64.  The Court reiterates that it is the master of the characterisation to be given in law to the facts of the case (see, among many authorities, Guerra and Others v. Italy, 19 February 1998, § 44, Reports of Judgments and Decisions 1998-I). It has previously held that whilst Article 1 of Protocol No. 1 contains no explicit procedural requirements, it nevertheless implies that domestic law must provide for legal protection against arbitrary interference by the public authorities and that any interference with the peaceful enjoyment of possessions must be accompanied by certain procedural guarantees (see Capital Bank AD v. Bulgaria, no. 49429/99, § 134, ECHR 2005-XII (extracts)). In the instant case the Court considers that the complaint about the lack of an effective judicial procedure for challenging the strike-off, which was raised by the applicant under Article 6 § 1 of the Convention, is closely linked to the complaint under Article 1 of Protocol No. 1 and may accordingly be examined as part of the latter complaint (see, mutatis mutandis, Forminster Enterprises Limited v. the Czech Republic, no. 38238/04, § 59, 9 October 2008).

A.  Applicability of Article 1 of Protocol No. 1 to the cancellation of the applicant’s share in company L.E.

1.  The parties’ submissions

65.  The parties accepted that the applicant’s personal liability for the outstanding debts of company L.E. amounted to an interference with his right to the peaceful enjoyment of his possessions. The Court takes the same view. However, they disagreed on whether Article 1 of Protocol No. 1 was applicable to the cancellation of the applicant’s share in company L.E., given that it no longer had any economic value.

66.  The Government acknowledged that a share in a company in principle constituted a “possession” for the purpose of Article 1 of Protocol No. 1, since it represented a set of rights including the right to manage the company and the right to a share in the profit. However, they pointed out that in the present case the company in question had not performed any business operations and had had no assets from which the creditor’s claim could be settled. Since the economic value of the applicant’s share in the struck-off company was thus questionable, the Government considered that the share could not be regarded as a “possession”. However, should the Court reach a different conclusion, the Government took the view that the measure whereby former members of struck-off companies were considered as universal legal successors to the companies and, accordingly, assumed responsibility not only for their liabilities, but also for any potential assets, amounted to control of the use of property.

67.  The applicant disagreed, arguing that according to the Court’s established case-law, Article 1 of Protocol No. 1 was applicable to a share in a company. He pointed out that in the case of Sovtransavto Holding v. Ukraine (no. 48553/99, §§ 91-93, ECHR 2002-VII), the Court had found that a holder of a share in a company had not only an indirect claim on the company’s assets, but also other corresponding rights such as voting rights and the right to influence the company. Thus, according to the applicant, it was of little importance that company L.E. had had no assets at the time of the strike-off. Also in that case the company’s members had retained their voting rights, the right to influence the company and other corporate rights. Moreover, the cancellation of the applicant’s share in L.E. had directly affected his rights protected under Article 1 of Protocol No. 1.

2.  The Court’s assessment

68.  The Court observes that, in so far as the applicant has complained of the loss of his share in company L.E. as a result of the strike-off, the present case raises two questions regarding the applicability of Article 1 of Protocol No. 1 relating to the nature of his share in the company.

69.  Firstly, the Court finds it necessary to examine a question of a more general nature, that is whether measures relating to the company could be regarded as directly affecting the rights of the applicant as a member of the said company. In this connection, the Court has reached an affirmative conclusion, inter alia, in cases where the impugned measures had a direct bearing on the rights inherent in owning stocks or shares, as is the case with the cancelling of shares or the obligation to exchange them at a disadvantageous rate (see Olczak v. Poland (dec.), no. 30417/96, §§ 60-62, ECHR 2002-X, and Pokis v. Latvia (dec.), no. 528/02, ECHR 2006-XV). While it is true that the impugned strike-off measure was to the detriment of company L.E., it is undisputable that it also directly affected the applicant in two different ways. Not only was his share in the company cancelled, but the cancellation of his share at the same time resulted in his personal liability for the debts of the struck-off company. Therefore, the dissolution of company L.E. entailed consequences which affected the financial interests of the applicant as a former member of the company and were thus directly decisive for his individual rights.

70.  Secondly, the Government raised the question of whether the applicant’s share of questionable economic value could be considered a “possession” within the meaning of Article 1 of Protocol No. 1. In view of this consideration, the Court finds that clarification of the nature of a share in a company is required in the specific circumstances of the present case.

71.  There is no doubt that a company share with an economic value can be considered a possession (see Olczak, cited above, § 60, and Sovtransavto Holding, cited above, § 91). The Court has also held that the shares of a company which was placed in compulsory administration for being insolvent and unable to meet its liabilities undoubtedly had an economic value and constituted possessions within the meaning of Article 1 of Protocol No. 1 (see Vefa Holding Sh.p.k. and Alimuçaj v. Albania (dec.), no. 24096/05, § 93, 14 June 2011). Indeed, as the Court has held on many occasions, a share in a company is a complex object. The ownership of a share implies that the holder possesses a bundle of corresponding rights. These encompass the right to a share to the company’s assets in the event of its being wound up, but also other unconditioned rights, especially voting rights and the right to influence the company’s conduct (see Company S. and T. v. Sweden, no. 11189/84, Commission decision of 11 December 1986, DR 50, p. 138). Hence, the Court agrees with the applicant that, although in the four years between the cessation of company L.E.’s activities and the strike-off he could not extract any pecuniary benefits from the company, he was still entitled to exercise a number of rights which arose from his possession of a share in the company. Those rights allowed the applicant and other members of company L.E. to engage in a commercial activity, and were thus of a pecuniary nature. Therefore, accepting that the mere possession of a share created interests of a proprietary nature, the Court cannot conclude that the lack of commercial activity and assets took the applicant’s share out of the ambit of Article 1 of Protocol No. 1.

72.  This suffices to make Article 1 of Protocol No. 1 applicable to the cancellation of the applicant’s share in L.E. as a result of the company being struck off from the court register.

B.  Compliance with Article 1 of Protocol No. 1

1.  Applicable rule of Article 1 of Protocol No. 1

(a)  The parties’ submissions

73.  The Government maintained that the alleged interference amounted to the control of the use of property, whereas the applicant emphasised that he had not only been divested of his share in company L.E., but he had also become liable for the company’s debts. Consequently, he had been forced to surrender his possessions to the company’s creditor. Stressing that he had suffered the direct consequences of the company’s enforced dissolution, the applicant took the view that the interference with his property rights had amounted to a deprivation of property.

(b)  The Court’s assessment

74.  As the Court has stated on many occasions, Article 1 of Protocol No. 1 comprises three rules: the first rule, set out in the first sentence of the first paragraph, is of a general nature and enunciates the principle of the peaceful enjoyment of property; the second rule, contained in the second sentence of the first paragraph, covers the deprivation of property and subjects it to conditions; the third rule, stated in the second paragraph, recognises that States are entitled, amongst other things, to control the use of property in accordance with the general interest. The second and third rules, which are concerned with particular instances of interference with the right to peaceful enjoyment of property, must be read in the light of the general principle laid down in the first rule (see, among other authorities, Sporrong and Lönnroth v. Sweden, 23 September 1982, § 61, Series A no. 52, and Depalle v. France [GC], no. 34044/02, § 77, ECHR 2010).

75.  The Court reiterates that the strike-off measure had two-fold consequences for the applicant’s property; on the one hand, it divested him of his share in company L.E., and on the other it gave rise to his personal liability for the debts of the struck-off company. As regards the cancellation of the applicant’s share, the Court has held, in the case of Olczak (cited above, § 71) where the applicant’s shareholding was reduced from 45% to 0.4%, that although the applicant was not technically divested of his shares, their economic value was sufficiently reduced to amount to a deprivation of property. By contrast, in the present case it was accepted by the parties that company L.E. had had no assets at the time of the strike-off. Moreover, the company had not been conducting any commercial activities for four years before the strike-off was enforced. In fact, it was precisely because of those circumstances that the strike-off was ordered. Thus, notwithstanding the finding that the possession of the share gave rise to proprietary interests and that the strike-off divested the applicant of those interests, account must be taken of the fact that the cancellation of his share did not reduce the economic value of his assets.

76.  Furthermore, even assuming that the cancellation of the applicant’s share in company L.E., viewed in isolation, can be considered deprivation of property, in the Court’s opinion it should be viewed in the wider context as part of the regulation aimed at improving corporate discipline and restoring the security of legal transactions on the Slovenian commercial market. In this connection, the applicant’s consequent personal liability for the payment of the company’s debts, which falls into that same context, entailed responsibility for the repayment of losses suffered by the creditor of company L.E. The Court is of the view that this obligation may be regarded as a sanction for the applicant’s failure, in his capacity as a member with influence on the company’s business operations, to comply with the corporate obligations of the company of which he was a member. Based on the principle permitting the lifting of the corporate veil, the impugned measure should be considered as a measure of State control over the operation of the market, over corporate practices and over the management of corporate property.

77.  In the light of the above circumstances, the Court finds that the strike-off had complex and diverse legal implications which cannot readily be classified in any specific category within Article 1 of Protocol No. 1. Moreover, the situations envisaged in the second sentence of the first paragraph of Article 1 as well as in its second paragraph are only particular instances of interference with the right to the peaceful enjoyment of property as guaranteed by the general rule set out in the first sentence of the first paragraph. Accordingly, the Court considers it necessary to examine the case in the light of the general rule set out in that Article.

2.  Whether the interference was justified

(a)  Lawfulness of the interference

(i)  The parties’ submissions

(α)  The applicant

78.  The applicant maintained that the circumstances in which the State had lifted the corporate veil and rendered individuals responsible for the liabilities of struck-off companies did not satisfy the requirement of legal certainty. He emphasised that before the introduction of the FOCA, individual members or shareholders of companies were personally liable for the companies’ debts only if they had caused damage to the company through inappropriate use of their corporate rights. However, the FOCA constituted a fundamental and swift overnight change of the entire system of company law.

79.  The applicant claimed that he had been legitimately unaware of the strike-off proceedings until served with an enforcement order, which had originally been directed against company L.E. He emphasised that the decision to institute strike-off proceedings and the strike-off decision had only been served on the company, which had however ceased to operate four years prior to the strike-off. Thus, it could not reasonably be expected that the company should acquaint itself with decisions which infringed its rights and interests. Moreover, the applicant, relying on the Court’s judgment in the case of Bruncrona v. Finland (no. 41673/98, 16 November 2004), argued that any decisions affecting his own rights and interests should have been served on him personally, which had not been the case in the strike-off proceedings. In view of this, the applicant maintained that he had not had a reasonable opportunity to put his case before the domestic authorities with a view to effectively challenging the measures interfering with his rights under Article 1 of Protocol No. 1. The enforcement order for the Railway Company’s claim against company L.E. had not been served on him until 2004, and it was only then that he had become aware that the company had been struck off the court register and of his consequent personal liability for its outstanding obligations.

80.  As regards the criteria for the personal liability of members, the applicant pointed out that at the time when company L.E. had been struck off the court register and the enforcement order issued against him, the Constitutional Court had not yet adopted its decision no. U-I-135/00. Consequently, the applicant could not have foreseen that at a later time a distinction would be made between “active” and “passive” members or shareholders. Also, the distinction was made retrospectively, since the Constitutional Court adopted the decision in question on 9 October 2002, a year after company L.E. had been struck off the court register. In the applicant’s opinion, the criteria for distinguishing between active and passive members were too vague; hence the case-by-case assessment of the status of individual members or shareholders of struck-off companies lacked sufficient legal certainty.

81.  In this light, the applicant argued that his options in the enforcement proceedings had been very limited, since the courts had been bound by the decisions delivered in the strike-off proceedings. His argument that he had not been an active member of the company according to the criteria set forth by the Constitutional Court in its decision no. U-I-135/00 had been dismissed on the grounds that his 11.11% share in the company had entitled him to the rights of a minority member who could thus influence the management of the company. Moreover, as a former director of the company, he had as a matter of fact influenced the management of the company’s business operations. In the applicant’s opinion, the domestic courts’ interpretation of what constituted an “active member” was arbitrary, disproportionate and in breach of the principle of legal certainty. The domestic courts had refused to give any weight to the fact that as a member of company L.E., he had not acted in bad faith, and that the company’s debt had been incurred prior to his participation in the company.

(β)  The Government

82.  The Government argued that the impugned measure was lawful since it was based on the provisions of the FOCA. Relying on the Constitutional Court’s decision no. U-I-135/00, the Government emphasised that the companies to which the strike-off was applied had been economically inactive. They had not conducted any business operations, generated any income, or made payments; nor had they had any assets. However, their financial situation had not been transparent to potential creditors, who could nevertheless presume that the companies in question had at least minimum assets. Consequently, non-operating companies could be abused in order to damage their creditors. Therefore, the introduction of the FOCA had been aimed at protecting the position of creditors and reducing the risks of conducting legal transactions on the Slovenian commercial market. In this connection, the Government further emphasised that in the enforcement proceedings against the applicant, his liability had been assessed according to the criteria established by the Constitutional Court. The applicant’s objection and subsequent appeals concerning the status of an active member had been rejected by the domestic courts at all levels.

83.  Furthermore, as regards the applicant’s alleged lack of access to the strike-off proceedings, the Government took the view that he had had a fair opportunity to participate in the proceedings, regardless of the fact that neither the decision to institute strike-off proceedings nor the decision on the strike-off had been served on him personally. Both documents had been duly served on company L.E. by leaving delivery slips in its mailbox, informing the company that the relevant correspondence could be collected at the post office. Since the mail had not been collected within the prescribed time-limit, both documents had been posted on the competent court’s notice board, and were thereby deemed to have been served. Additionally, the decision to institute strike-off proceedings had been published in the court register, which was an easily accessible public register, while the decision on the strike-off had been published in the Official Gazette. The notification of the strike-off had also been published in the Official Gazette. In view of this, the Government argued that, had the applicant and other members of company L.E. acted with due diligence, they could have acquainted themselves with both documents in two different manners. They also emphasised that the time-limits for lodging an objection to the institution of proceedings and an appeal against the strike-off decision had been extensive, namely two months and thirty days, respectively.

84.  The Government further pointed out that, while the initial members of a limited liability company were to be entered in the court register, subsequent changes in membership were not required to be listed in the register in order to take effect. Thus in many cases - including the case of company L.E. where four members who had died prior to the strike-off had been listed as members in the court register until the strike-off - the authorities did not have information allowing them to serve the documents personally on members. Referring to Constitutional Court decision no. U-I-135/00, the Government affirmed that the personal service of documents would have been not only too time-consuming, but in many cases impossible.

85.  Furthermore, despite the applicant’s active role in the operations of the company, he had failed to collect the company’s mail or to monitor the public records (the court register and the Official Gazette), even though he must have been aware that strike-off proceedings would be initiated eventually. Also, the applicant had undoubtedly been aware of the civil proceedings initiated against company L.E. by the Railway Company (see paragraph 14 above) and could have expected that the latter would attempt to enforce its claims. Lastly, the Government emphasised that, even if the applicant had objected to the strike-off in due time, the reasons which he had subsequently put forward in the enforcement proceedings to show that he was not an active member of the company would not have prevented the company from being struck off the court register. Namely, the fact that company L.E.’s prior petition for bankruptcy had been rejected for failure to make an advance payment to cover the costs of the proceedings could not be regarded as one of the grounds on which a company could successfully object to the strike-off (see paragraph 39 above).

(ii)  The Court’s assessment

(α)  General principles

86.  The Court reiterates that its power to review compliance of impugned acts with national law is limited and it is in the first place for the domestic authorities, notably the courts, to interpret and apply the domestic law and to decide on issues of constitutionality (see, among many other authorities, Wittek v. Germany, no. 37290/97, § 49, ECHR 2002-X; Forrer-Niedenthal v. Germany, no. 47316/99, § 39, 20 February 2003, and The Former King of Greece and Others v. Greece [GC], no. 25701/94, § 82, ECHR 2000 XII). However, that does not dispense with the need for the Court to determine whether the interference in issue complied with the requirements of Article 1 of Protocol No. 1. The Court further reiterates that the first and most important requirement of Article 1 of Protocol No. 1 is that any interference by a public authority with the peaceful enjoyment of possessions should be lawful: the second sentence of the first paragraph authorises a deprivation of possessions only “subject to the conditions provided for by law” and the second paragraph recognises that States have the right to control the use of property by enforcing “laws”. Moreover, the rule of law, one of the fundamental principles of a democratic society, is inherent in all the Articles of the Convention (see Capital Bank AD, cited above, §§ 132-33, with further reference to Iatridis v. Greece [GC], no. 31107/96, § 58, ECHR 1999-II).

87.  The principle of lawfulness also presupposes that the applicable provisions of domestic law are sufficiently accessible, precise and foreseeable in their application (see Beyeler v. Italy [GC], no. 33202/96, §§ 109-10, ECHR 2000-I). Likewise, domestic law must provide a measure of legal protection against arbitrary interferences by the public authorities with the rights safeguarded by the Convention (see Hasan and Chaush v. Bulgaria [GC], no. 30985/96, § 84, ECHR 2000-XI). It is true that Article 1 of Protocol No. 1 contains no explicit procedural requirements and the absence of judicial review does not amount, in itself, to a violation of that provision (see Fredin v. Sweden (no. 1), 18 February 1991, § 50, Series A no. 192, and S.C. Antares Transport S.A. and S.C. Transroby S.R.L. v. Romania, no. 27227/08, § 46, 15 December 2015). Nevertheless, it implies that any interference with the peaceful enjoyment of possessions must be accompanied by procedural guarantees affording to the individual or entity concerned a reasonable opportunity of presenting their case to the responsible authorities for the purpose of effectively challenging the measures interfering with the rights guaranteed by that provision. In ascertaining whether that condition has been satisfied, a comprehensive view must be taken of the applicable judicial and administrative procedures (see Jokela v. Finland, no. 28856/95, § 45, ECHR 2002-IV with further references, and Stolyarova v. Russia, no. 15711/13, § 43, 29 January 2015).

(β)  Application of those principles to the present case

88.  Turning to the circumstances of the present case, the Court notes, at the outset, that the impugned measure of striking off inactive companies devoid of assets from the court register was the Slovenian legislature’s response to a situation which appears to have been endemic during the political transition to a free-market economy in Slovenia. The legislature initially set out to establish an open market which was accessible to as many investors as possible (see paragraph 30 above) which, however, resulted in an ever-increasing number of companies which were not able to meet their liabilities and to stay in operation. The Companies Act of 1993 thus increased the minimum share capital and imposed on existing companies a time-limit by which they had to bring their operation in line with the new stricter legislation (see paragraph 34 above). That attempt at strengthening the legal security of the commercial market was, however, not successful. By 1998 there were more than 6,000 companies which had not been operative for a considerably long period and had no assets (see paragraph 108 below). Nevertheless, the persons in charge of the companies’ operations either did not institute any type of proceedings aimed at dissolving the inactive undertakings, or, as was the case with company L.E., did not follow them through to the end.

89.  The legislature first responded to the widespread problem of inactive and insolvent companies by introducing a measure of bankruptcy initiated by the competent courts proprio motu. This, however, failed to successfully address the problem. Subsequently, on 23 July 1999 the legislature introduced the FOCA, which imposed on companies a number of measures aimed at managing their liquidity and solvency. Furthermore, if a company found itself in a situation of illiquidity or insolvency and was unable to re-establish the normal course of business operations within two months, the FOCA required it to file for bankruptcy or compulsory composition (see paragraph 37 above). Companies which failed to comply with those rules were to be struck off the court register proprio motu without a prior winding-up procedure. The measure of striking off a company from the register thus necessarily resulted in the cancellation of the company’s shares, but it had a further impact on the members or shareholders of such a company, since they became personally liable for its debts.

90.  As regards the lawfulness of the impugned interference, the Court notes that the strike-off of company L.E. and its implications were based on the provisions of Chapter 3 the FOCA (see paragraphs 38 and 41 above). The FOCA was published in the Official Gazette no. 54/99 of 8 July 1999 and entered into force on 23 July 1999 (see paragraph 36 above). The Act contained the requirements under which companies were allowed to operate, as well as the conditions under which strike-off proceedings would be initiated (see paragraph 38 above) and detailed provisions on the course of the proceedings and the remedies which could be used against the strike-off decision (see paragraphs 39-40 above). The Act also included a provision that members or shareholders of struck-off companies would be held personally liable for the outstanding debts of their former companies (see paragraph 41 above).

91.  Viewed as a whole, those provisions provided a clear and comprehensive framework of legislation aimed at strengthening the legal security of market participants and protecting creditors. Indeed, the Court agrees with the applicant that the changes had wide-reaching consequences; however, those consequences did not manifest themselves unexpectedly. On the contrary, the provisions of Chapter 3 of the FOCA, which contained the strike-off measure, only became applicable one year after the Act had entered into force. In the Court’s opinion, the one-year vacatio legis provided inactive and insolvent companies such as L.E. with sufficient time to institute appropriate proceedings in order to have the company dissolved and to avoid its being struck off the court register.

92.  The applicant argued that he had justifiably been unaware of the strike-off proceedings until the enforcement order had been served on him almost four years later. However, in line with the principle that “ignorance of the law is no excuse”, the Court considers that the applicant was not absolved from acquainting himself with the provisions of the FOCA (see K.-H.W. v. Germany [GC], no. 37201/97, § 73, ECHR 2001 II (extracts)). At the time when the Act was passed, the applicant was still a minority member of company L.E. Moreover, as a former managing director, he must have been well aware not only of the insolvent state of the company, but also of the civil proceedings brought against it by its creditor (see paragraphs 8 and 14 above). As a result of the above, the Court is of the view that the applicant was expected to devote his attention in no small measure to the outstanding issues facing the company. It considers that the applicant was expected to be acquainted with the legislation applicable to companies, and in particular to insolvent companies. It is worth noting in this connection that a law may satisfy the requirement of foreseeability even if the person concerned has to take appropriate legal advice to assess, to a degree that is reasonable in the circumstances, the consequences which a given action may entail. The Court has emphasised that professional advice may be of particular importance to persons carrying on a professional activity, since they are expected to take special care in assessing the risks that such activity entails (see, mutatis mutandis, Cantoni v. France, 15 November 1996, § 35, Reports 1996-V). The same may be said to apply to persons engaging in commercial ventures.

93.  In the light of the above findings, the Court finds that the regulation introduced by the FOCA was accessible to the applicant and that the contents of the Act were sufficiently clear to enable him to foresee that company L.E. ran the risk of being struck off the court register. In this connection, the Court would add that the principle of legal certainty, which is implicit in all the Articles of the Convention and constitutes one of the basic elements of the rule of law, does not only involve the requirement of clarity and foreseeability of the law, but requires, inter alia, a legal environment in which legal norms are consistently applied and enforced by the State.

94.  Moreover, it is true, as argued by the applicant, that the legislative conception of personal liability for the debts of struck-off companies, according to which all members were liable irrespective of their roles in the companies, was mitigated by the Constitutional Court’s decision no. U-I-135/00 no sooner than two years after the entry into force of the FOCA and one year after the provisions on strike-off became applicable. However, that fact did not affect the applicant in any way, as the issue of his own personal liability for the debts of company L.E. was established in the enforcement proceedings which began in April 2002 (see paragraph 21 above) and ended in July 2007 (see paragraph 28 above). Throughout those proceedings, of which he only became aware in December 2004 (see paragraph 23 above), the applicant argued that he had not been an active member of company L.E., relying on the very decision of the Constitutional Court to support his main argument against the enforcement. Thus, the Court cannot discern that the applicant was in any way impeded in the exercise of his rights by the fact that the distinction between active and passive members was only introduced in October 2002 (see paragraphs 46 and 48 above).

95.  In sum, the Court finds that the regulation introduced by the FOCA and amended by the Constitutional Court was adequately accessible and foreseeable; thus the interference complained of had a sufficient legal basis in Slovenian law to comply with the requirements of the second paragraph of Article 1 of Protocol No. 1.

96.  Secondly, the applicant complained that he had not had access to procedures enabling him to effectively challenge the strike-off and the ensuing personal liability for the debts of company L.E. The Court notes that the two elements of the interference complained of were subject to separate sets of proceedings. The strike-off measure was enforced in the strike-off proceedings, while the applicant’s personal liability was established in the enforcement proceedings, in which company L.E., the initial debtor, was replaced by its former members after it had been struck off the court register.

97.  The main issue raised by the applicant in respect of the strike-off proceedings was the fact that the decision to institute those proceedings and the decision to strike-off the company from the register had not been personally served on him. Indeed, the Court observes that the first document was served on the company and entered in the court register (see paragraph 39 above), while the second was published in the Official Gazette in addition to being served on the company (see paragraph 40 above). The company concerned, its members and creditors could lodge an objection to the decision to institute proceedings within a two-month time-limit, while the time-limit for lodging an appeal was thirty days after service of the document on the company concerned or its publication in the Official Gazette. Therefore, contrary to the case of Bruncrona (cited above, §§ 65-69) relied on by the applicant, in the present case the information on the impending strike-off was provided prior to the measure coming into effect; it is rather the manner of the service that is disputed by the applicant.

98.  The Court will assess whether the applicant had a reasonable opportunity to challenge the strike-off measure despite the lack of personal service of process, on the basis of the same considerations as those applied in establishing whether the legislation in question was accessible and foreseeable. In this connection, the Court notes that the FOCA set out the manner in which the procedural documents were to be served on the parties concerned. Both documents were served on company L.E. by means of delivery slips left in its mailbox, informing it to collect the documents at the post office. The company failed to do so, and the documents were subsequently served by being posted on the competent court’s notice board. Having regard to the Court’s view that the rules governing the formal steps to be taken and the time-limits to be complied with in lodging an appeal are aimed at ensuring a proper administration of justice and compliance, in particular, with the principle of legal certainty, the applicant was entitled to expect those rules to be applied (see Cañete de Goñi v. Spain, no. 55782/00, § 36, ECHR 2002-VIII).

99.  The Government argued that it would have been too time-consuming, if not impossible, to attempt to serve the documents on individual members of the companies concerned, adding that if the applicant and other members had acted with due diligence, they could have acquainted themselves with both documents in due time. Having regard to the above considerations (see paragraphs 92-94 above), the Court agrees that the applicant’s failure to appeal against either the decision to institute strike-off proceedings or the strike-off decision was attributable to his own lack of diligence, given that he could reasonably have expected that strike-off proceedings would be brought against company L.E. and, either by himself or together with the other members of the company, he could have taken the necessary steps to collect its mail (see Hennings v. Germany, 16 December 1992, § 26, Series A no. 251-A).

100.  In any event, the Court is of the view that, for as long as the members maintained the company in operation, albeit only formally, and because they failed to find a way to dissolve it, they should have ensured some basic management, especially since there was already one set of judicial proceedings pending against it.

101.  Lastly, in view of the conclusion that the due diligence required of the applicant would have enabled him to participate effectively in the strike-off proceedings, the Court can accept the pragmatic approach of the domestic authorities to the service of documents in strike-off proceedings, especially since service to the companies was coupled with considerably long time-limits for appealing against the initiation of strike-off proceedings as well as the strike-off decision.

102.  In the light of the foregoing, the Court finds that the measure of striking off company L.E. from the register provided sufficient procedural guarantees to the applicant and was thus lawful within the meaning of Article 1 of Protocol No. 1.

103.  As regards, however, the enforcement proceedings, the Court notes that the applicant essentially complained that the domestic courts had incorrectly applied the criteria for distinguishing between active and passive members. In the Court’s view this complaint may be regarded as an issue of substantive law, and thus more appropriately addressed in the context of the assessment of the proportionality of the interference with the applicant’s peaceful enjoyment of property caused by his personal liability for the debts of the struck-off company. Moreover, in its assessment of the proportionality of the interference the Court will refer, in so far as necessary, to the findings made above with regard to the applicant’s behaviour and the extent to which it contributed to the measures complained of.

(b)  Aim of the interference

(i)  The parties’ submissions

104.  The applicant observed that the strike-off measure had had wide-reaching consequences, since altogether more than 17,000 companies had been struck off the court register and approximately 50,000 individuals had been affected. The applicant took the view that the strike-off measure had not been justified by any particular circumstances which could not have been appropriately addressed in bankruptcy proceedings.

105.  The applicant further pointed out that the legislature had been aware of its mistake in introducing the FOCA, and had twice attempted to correct what he considered was an unconstitutional regulation governing the strike-off measure, so as to relieve former members of struck-off companies of their personal liability for the companies’ debts. In 2007 the legislature introduced an amendment to the FOCA (see paragraph 43 above) and in 2011 the Shareholders’ Liability for Corporate Obligations Act came into force (see paragraph 45 above). The applicant, relying on the reasons adduced by the legislature in support of the amendments, maintained that the disputed legislation was in contravention with the fundamental principles of corporate law in Slovenia and the European Union. However, the proposed amendments to the FOCA had not been enacted; on both occasions the Constitutional Court had annulled the amended regulation, finding that the provisions relieving former members of their personal liability had not afforded sufficient protection to the creditors of struck-off companies.

106.  The Government argued that the strike-off measure was in accordance with the general interest, which was to protect creditors and ensure the security of corporate legal transactions. From 1991 to 1998, the average amount of companies’ unfulfilled obligations increased from SIT 6,319,000,000 (EUR 26,400,000) to SIT 87,573,000,000 (EUR 365,400,000); in 1998 the amount was 15 per cent higher than the year before.

107.  It was estimated that at the beginning of 1998 there were more than 6,000 companies which had not been conducting any business operations for a very long period and had had no assets. Also, in that same year 8,537 legal entities had their bank accounts blocked for more than five days on account of unpaid debts; a significant proportion of those entities (6,587) had their accounts blocked for more than a year and 6,083 of them had no employees. According to the Government, those data led to the conclusion that 92% of legal entities which had had their bank accounts blocked for more than a year were no longer operating and had no assets.

108.  The then applicable legislation provided that in cases of such companies, bankruptcy proceedings would be initiated proprio motu. However, the legislature decided that this was proving too costly and too difficult to manage. A landslide of bankruptcy proceedings would block the courts, given that they were required by law to give priority to those cases. It thus opted for introducing a new procedure whereby non-operating companies could be dissolved without prior winding up, since they had no assets to sell and the creditors could not be repaid from the proceeds.

(ii)  The Court’s assessment

109.  Any interference with the enjoyment of a right or freedom recognised by the Convention must pursue a legitimate aim. The principle of a “fair balance” inherent in Article 1 of Protocol No. 1 itself presupposes the existence of a general interest of the community. Moreover, it should be reiterated that the various rules incorporated in Article 1 are not distinct in the sense of being unconnected and that the second and third rules are concerned only with particular instances (see paragraph 74 above). One of the effects of this is that the existence of a “public interest” required under the second sentence, or the “general interest” referred to in the second paragraph, are in fact corollaries of the principle set forth in the first sentence, so that an interference with the exercise of the right to the peaceful enjoyment of possessions within the meaning of the first sentence of Article 1 must also pursue an aim in the public interest (see Beyeler, cited above, § 111).

110.  The Court reiterates that because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to decide what is “in the public interest”. Under the system of protection established by the Convention, it is thus for the national authorities to make the initial assessment as to the existence of a problem of public concern warranting measures to be applied in the sphere of the exercise of the right of property (see Hutten-Czapska v. Poland [GC], no. 35014/97, § 165, ECHR 2006-VIII). The Court notes that the decision to enact laws regulating the operation of the commercial market and the management of corporate property with a view to strengthening the overall legal security on the market will commonly involve consideration of political, economic and social issues. In matters of general social and economic policy, on which opinions within a democratic society may reasonably differ widely, the domestic policy-maker should be afforded a particularly broad margin of appreciation (see Vistiņš and Perepjolkins v. Latvia [GC], no. 71243/01, § 98, 25 October 2012, and Stec and Others v. the United Kingdom [GC], no. 65731/01, § 52, ECHR 2006 VI).

111.  In the present case, strike-off was a measure aimed at dissolving a large number of inactive and insolvent companies. The transitional legislation regulating the establishment and operation of companies had opened the commercial market to a large number of investors, many of whom proved unable to operate viable businesses. Those companies may be said to have constituted a market anomaly which necessitated legislative action to remedy the insolvent companies’ adverse effects on financial discipline in corporate legal transactions and the position of their creditors. The FOCA thus constituted an attempt to restore stability in the commercial market. The Court finds no reason to doubt that the Slovenian legislature’s approach to ensuring a better functioning of the market was “in the public interest”. It remains to be seen whether this public-interest aim was also proportionate to the interference.

(c)  Proportionality of the interference

(i)  The parties’ submissions

(α)  The applicant

112.  Referring to the Court’s judgment in the case of Agrotexim and Others v. Greece (24 October 1995, § 66, Series A no. 330 A), the applicant pointed out that according to the Court’s case law, the lifting of the corporate veil by disregarding a company’s legal personality was only justified in exceptional circumstances. Moreover, citing the Court’s decision in Olczak (cited above, § 58), the applicant asserted that the Court had already held that the cancellation of shares in a company was directly aimed at the rights of shareholders. Thus, the applicant emphasised that his rights protected by Article 1 of Protocol No. 1 had been directly affected and that any interference with the right to peaceful enjoyment of property should have been - but was not - fairly balanced against the general interest it sought to protect. In this connection, the applicant stressed that he had not abused company L.E. to the detriment of the creditors and that the fact that he could influence the company’s operation was not a valid reason on which to base his personal liability for its debts. He also emphasised that the debt in question had been incurred without his participation, that he had no longer been managing director of the company at the time of the strike-off, and that he had attempted to have the company dissolved by instituting bankruptcy proceedings. Those reasons, however, had been entirely disregarded by the domestic courts which, moreover, decided without a public hearing.

113.  Furthermore, the applicant adduced that the lifting of the corporate veil and the imposition of personal liability on members of struck-off companies lacked a legitimate aim, as the objectives sought by the legislature, namely the protection of creditors and the security of legal transactions, would have been adequately achieved merely by dissolving inactive companies. While admitting that without the introduction of personal liability for debts, the creditors would not have been repaid, the applicant emphasised that the debts had occurred through the normal course of business operations. Any wrongful or fraudulent actions on the part of the management or members of companies, however, could be sanctioned by means of other legal instruments aimed at preventing and redressing such actions. The applicant added that also in cases of bankruptcy, creditors’ claims remained unpaid. In his opinion, there was therefore no convincing reason to adopt a different approach in cases of companies having no assets.

(β)  The Government

114.  The Government asserted that the measure had only been used as a last resort, that is in cases where non-operating companies had not been dissolved by their members through winding up or bankruptcy. Therefore, strike-off could be avoided if the members of a non-operating company acted in due time. Also, if the costs of initiating bankruptcy proceedings were set too high, the company could have appealed against the advance payment order. In this connection, the Government submitted a number of court decisions in which bankruptcy petitioners had succeeded in having the amount of advance payment reduced.

115.  The Government added that the FOCA had provided for a long transitional period in which companies and their members had had the time to acquaint themselves with its provisions and to act accordingly. The presumption that a company had met the conditions for strike-off on account of not having any assets - which had been the case for company L.E. - could not take effect before 23 July 2000, one year after the FOCA entered into force (see paragraph 42 above). In total, more than three years had passed from when the bankruptcy petition had been rejected to when the strike-off proceedings had been initiated.

116.  Secondly, with regard to the personal liability of members for the obligations of struck-off companies, the Government acknowledged that the liabilities of company members were, in principle, limited to the value of the shares held by them. However, they emphasised that the measure of lifting the corporate veil could be used in cases where the members had abused their respective companies. In addition, the rule of disregarding the legal entity had been applied to members of companies which, after the entry into force of the Companies Act (see paragraph 34 above), had failed to comply, within the prescribed time-limit, with the then newly applicable rules on company management and operations and the amount of share capital. Similarly, the sanction of strike-off was designed to protect the security of legal transactions and the position of creditors. Hence the legislature decided to follow the same principle and to disregard the corporate entity of non-operating companies. However, since members of struck-off companies were regarded as universal legal successors of the companies, they not only assumed liability for the companies’ obligations, but were also entitled to any potential assets of those companies.

117.  As regards the degree of the members’ liability, the Government referred to decision no. U-I-135/00 (see paragraphs 46-49 above) in which the Constitutional Court had taken the view that those members who had influence on the operations of the company (“active members”) were legitimately held accountable for the outstanding liabilities. The decision on whether an individual member could be regarded as an active member was based on a number of criteria, in particular on whether he or she had had any influence on the management of the company, the knowledge and degree of his or her involvement in the management of the company, his or her interest in being involved in the company, and on whether the obligations had arisen during the time when the individual had been a member of the company or later. In the Government’s opinion, those considerations which distinguished between active and passive members ensured an appropriate balance between the general interest, that is the protection of creditors and the security of legal transactions, and the members’ right to peaceful enjoyment of property.

118.  As regards the applicant, the Government, referring to the decisions of the domestic courts rendered in the enforcement proceedings, pointed out that he had been employed by company L.E., in addition to which he had served first as its acting director and later its managing director. Moreover, the applicant had had an 11.11% share in the company and thus had been entitled to request that a decision be taken on appointing a new manager or on further action with regard to the financial situation of the company, given that the company’s petition for bankruptcy had been rejected on procedural grounds (see paragraph 12 above).

(ii)  The Court’s assessment

119.  The Court reiterates that in such a sensitive economic area as the establishment and operation of a market economy, the Contracting States enjoy a wide margin of appreciation (see Jahn and Others v. Germany [GC], nos. 46720/99, 72203/01 and 72552/01, § 91, ECHR 2005-VI). Thus, in situations such as the deterioration of the commercial market due to a high number of inactive and insolvent companies, there may be a paramount need for the State to act in order to avoid irreparable harm to the economy and to enhance the legal security of participants in the market. Nevertheless, such margin should not exceed what is necessary to protect the essence of the individuals’ rights embodied in Article 1 of Protocol No. 1.

120.  In that connection, a law interfering with the right to the peaceful enjoyment of possessions must achieve a “fair balance” between the demands of the general interest of the community and the requirements to protect the individual’s fundamental rights. The search for this balance is reflected in the structure of Article 1 as a whole. In particular, there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised by any measures applied by the State. In each case involving the alleged violation of that Article the Court must, therefore, ascertain whether by reason of the State’s action or inaction the person concerned had to bear a disproportionate and excessive burden (see Sporrong and Lönnroth, § 73, and The Former King of Greece and Others, §§ 89-90, both cited above, with further references).

121.  In the present case, there may be no doubt that the strike-off measure involved extensive consequences for numerous individuals including the applicant who, as a result, became personally liable for their respective companies’ debts. In this connection, the Court observes that the applicant’s submissions were focused rather on this second aspect of the interference. However, the Court considers it appropriate to first examine the dissolution of company L.E. and the cancellation of the applicant’s share in the company. The strike-off measure constituted a type of administrative dissolution of companies imposed on them for failing to comply with the statutory requirements for the operation of companies. In fact, the measure only affected those companies which for a considerably long period had not been operating in accordance with the law or, more accurately, were no longer operating at all. It is clear that company law did not provide that insolvent companies should continue to exist (see paragraphs 34-37 above). Yet a great number of them existed formally, and although most of them had no assets, many of them were burdened by debts (see paragraphs 107-108 above). The Court agrees with the Government that such a situation could not be perpetuated indefinitely.

122.  In the case of company L.E., the applicant acknowledged that it had already been insolvent at the time when it had been converted into a limited liability company (see paragraph 10 above), a corporate form which required a larger amount of minimum share capital than that required of legal entities incorporated earlier. Thus, it can only be concluded that, as a limited liability company, L.E. was not adequately capitalised from the start and acted in contravention of the applicable rules of company law. Moreover, despite the fact that the company had been unable to re-establish liquidity and solvency since 1995, it did not apply for bankruptcy until two years later, when it was evidently lacking any assets whatsoever. As a result, it failed to make an advance payment for the costs of the proceedings in the amount of EUR 626, and instead decided to wait until such proceedings were instituted proprio motu (see paragraph 35 above). However, the relevant legislation changed and removed that possibility; the FOCA introduced stricter provisions on the operation of companies. In the one-year transitional period before the provisions on strike-off came into effect, the company could have instituted another set of bankruptcy proceedings. Indeed, in such a case the members would have been required to cover the costs of the bankruptcy proceedings, but would have avoided the strike-off and personal liability for the debts of the company. In addition, the Court reiterates that from June 1997 until it was struck off in September 2001, the company existed without any management, despite the fact that civil proceedings had been pending against it since 1993 for the payment of a debt. In the Court’s opinion the lack of management, even if not in contravention of the law, was certainly not in line with good business practices.

123.  In sum, although the company was not able to pay its debts or to perform the activities for which it had been established, it perpetuated its existence. In view of these considerations, the Court agrees with the position of the Constitutional Court relied on by the Government that inactive and/or insolvent companies posed a threat to the proper functioning of the market. Moreover, as argued by the Government, the strike-off proceedings were initiated as a measure of last resort, that is in the absence of any other proceedings being instituted to dissolve the company. Also, as already found, they were accompanied by sufficient procedural guarantees which, but for the applicant’s lack of due diligence, would have enabled him to effectively defend his interests (see paragraphs 99-103 above).

124.  Lastly, as regards the burden that the cancellation of his share represented for the applicant, the Court has already found that as company L.E. had no assets, the cancellation of his share did not reduce the economic value of his property. Moreover, the applicant and other members had in any event intended to dissolve the company by themselves, and according to the applicant, it was only the impossibility of making the advance payment for the costs of bankruptcy proceedings that prevented them from doing so. In this light, the Court finds that the measure of striking off company L.E. from the register did not represent an excessive individual burden for the applicant.

125.  It remains to be examined whether the same conclusion applies to the applicant’s consequent personal liability for the debts of company L.E. The applicant was convinced that this instance of piercing of the corporate veil was not justified in the circumstances of his case. He relied, inter alia, on the Court’s case-law developed in the judgment Agrotexim and Others (cited above), according to which only exceptional circumstances can justify the lifting of the corporate veil. However, this view was not developed in response to the question whether the interference with the right to a peaceful enjoyment of possession was justified or proportionate, but rather in response to the question whether an applicant may in any circumstances claim to be a victim of a violation of Article 1 of Protocol No. 1 as a result of actions aimed at the property of a company, a separate legal entity (see Agrotexim and Others, cited above, § 66, and Olczak, cited above, § 57). In the present case, this question has already been answered in the affirmative (see paragraph 69 above). As regards, however, the question of whether the circumstances of the present case justified the strike-off, in the Court’s opinion the above-mentioned disregard on the part of company L.E. for company law and the principles of good corporate governance, which consisted of (a) inadequate capitalisation, (b) failure to observe the law and good business practices, (c) a prolonged state of insolvency, and (d) inactivity on the part of the company’s management, warranted a strong response by the authorities, including the imposition of personal liability on any member who was found to be responsible for the irregularities in the operation of the company.

126.  The Court further observes that the effect of reducing the capital below the statutory limit and eventually exhausting it completely, coupled with prolonged failure to institute bankruptcy proceedings, had considerable adverse effects on the position of the company’s creditor. The latter was subjected to prolonged uncertainty as to whether its debt would be repaid (see paragraphs 9, 14 and 21-29 above). In the Court’s opinion, such a lengthy course of proceedings could have been avoided if company L.E. had applied for bankruptcy in due time after recognising that it was unable to re-establish sufficient basic funds to continue its operations. Had it done so, the company would probably still have had the necessary funds to cover the costs of bankruptcy proceedings.

127.  Thus, while it may be true, as argued by the applicant, that the debts had occurred through the normal course of business operations, the Court finds that the effects of the company’s subsequent prolonged inactivity do not subscribe to that same context.

128.  As regards the domestic courts’ assessment of the applicant’s personal liability for the debts of company L.E., the Court observes that already as a minority member, he had substantial influence on the operation of the company (see paragraph 32 above), including the possibility of lodging a judicial action requesting that the company be dissolved (see paragraph 33 above). Moreover, the applicant was employed by the company for more than four years and was involved in its management, first as its acting director and later as managing director (see paragraphs 7-8 and 10 above). Therefore, in the Court’s opinion, the above-mentioned irregularities in the operation of company L.E. were to a large extent attributable to the applicant himself. Against this background, and considering the Constitutional Court’s view on the elements of distinction between active and passive members (see paragraphs 48-49 above), the Court finds it reasonable that the applicant was found by the domestic courts to have been an active member of company L.E., and thus liable for the payment of its debts. In this connection, it is noted that the Constitutional Court confirmed that the lower courts had correctly applied its criteria for differentiating between active and passive members to the applicant’s individual situation (see paragraph 28 above). Therefore, reiterating that it is in the first place for the domestic authorities, notably the courts, to interpret and apply the domestic law, the Court cannot accept the applicant’s argument that the domestic courts should have given more weight to other elements adduced by him (see paragraph 114 above) and absolved him from his personal liability.

129.  Also, in so far as the applicant complained that the decision on his active status had been taken without a public hearing, the Court observes that the applicant had not requested such a hearing throughout the domestic proceedings. Neither did the applicant claim that he had at any point during those proceedings lodged a request to that effect.

(d)  Conclusion

130.  In conclusion, given the wide margin of appreciation which the Contracting States enjoy in matters of economic policy systems, the Court finds that the measure complained of did not represent an excessive individual burden for the applicant in the particular circumstances of the present case. Accordingly, there has been no violation of Article 1 of Protocol No. 1.

III.  ALLEGED VIOLATION OF ARTICLE 13 OF THE CONVENTION

131.  The applicant also complained that he had been denied an effective remedy under Article 13 of the Convention with respect to the strike-off proceedings. He had been unable to obtain redress for the violation of his right to participate in the proceedings and had had no effective remedy against the decision to strike off the company from the register.

132.  The Court observes that the applicant’s complaint about the unlawfulness of strike-off, viewed in the light of the accessibility and foreseeability of the legislation on which the measure was based, was not found to disclose a violation of Article 1 of Protocol No. 1 to the Convention. Neither did the Court find his complaint about the lack of sufficient procedural guarantees for challenging strike-off to have any merit. On the basis of these and other considerations adduced by the parties, the Court found that the measure did not represent an excessive individual burden for the applicant (see paragraph 130 above). In view of the abovementioned findings, the Court considers that the applicant could not justifiably claim any redress for his inability to participate in the proceedings, which was found to be attributable to his lack of due diligence (see paragraph 104 above). For the same reason, the Court cannot accept his complaint about the lack of an effective remedy against the strike-off decision to be “arguable” for the purposes of Article 13.

133.  It follows that also this part of the application is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention.

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

1.  Declares the applicant’s complaints under Article 1 of Protocol No. 1 to the Convention admissible and the remainder of the application inadmissible;

 

2.  Holds that there has been no violation of Article 1 of Protocol No. 1 to the Convention.

Done in English, and notified in writing on 14 February 2017, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

  Marialena Tsirli                                                                      András Sajó
       Registrar                                                                              President