Following the reform of the Capital Companies Act, approved by the Spanish Parliament, the Royal Legislative Decree 1/2010 of 2 July 2010, by Law 11/2018 of 28 December 2018, which amends the Capital Companies Act The Corporate Governance Improvement Act (hereinafter referred to as LSC), the directors' liability regime underwent a major modification. This law includes the liability of company directors, who are responsible for acting in the name and on behalf of the company they manage.
Depending on their nature, company directors may incur various types of liability: criminal, commercial, tax, labour or administrative.
Commercial liability
A company director is obliged to comply with the duties established by the aforementioned Capital Companies Act. If these duties are breached and thus cause direct damage to the company, the shareholders or third parties, liability can be derived against the directors.
Commercial liability is of a civil nature, different from the others. The liability regime for directors is common to both public limited companies (S.A.) and private limited companies (S.L.). In this case, the LSC, in article 236.1, states that:
“The directors shall be liable to the company, to the shareholders and to the company's creditors for any damage caused by acts or omissions contrary to the law (...) provided that there has been fraud or negligence. Guilt shall be presumed, unless proved otherwise, when the act is contrary to the law or to the articles of association”.”
Social action or individual action for accountability?
The law distinguishes between social action and individual action when it comes to the commercial liability of directors. It is a corporate action when the damage caused by the act of the directors has had its consequences on the company. On the other hand, if this damage has repercussions on the shareholders or third parties, it is an individual liability action.
When is there commercial liability on the part of the administrator?
Analysing the article mentioned above, we understand that there is a social action of commercial liability when:
- The damage caused by the director's actions is suffered by the company itself.. This act legitimises the company to bring an action for social liability.
- When the director breaches the obligations by performing acts or omissions contrary to the law or the articles of association.. Also, if he or she fails to perform the duties inherent to the performance of the office.
- Also, a causal link between the two previous points. That is, there must be a correlation between the wrongful act and the damage caused to society as a result of the wrongful act.
In the case of damage caused by the administrator's actions or omissions, the damage will be quantified financially. In this way, it will be a proof for the asset bringing the legal action.
On this point, according to article 238 of the LSC, the following are entitled to exercise the right of action social responsibility action, in that order:
- Society itself.
- Shareholders.
- Creditors.
With regard to the individual liability action, In order to be able to initiate it, certain specific budgets are required:
- Direct damage to partners or third parties.
- That it is an act of the administrators by failure or omission of their duties.
- That there is such a causal link between the wrongful act and the damage suffered by the member or third party.
If you have any questions about directors' liability, please do not hesitate to contact us. At Martínez-Sanz Lawyers we are specialists in commercial law and will be pleased to help you.
