Article 69 and 105.5 of the Limited Liability Company’s Act (Ley 2/1995, de 23 de marzo de Sociedades de Responsabilidad Limitada) define two different situations under which Directors of companies that operate in Spain might be liable for its debts:
- Liability based on fraud or negligence (responsabilidad por culpa o negligencia)
In any case, if a Director has acted fraudulently or in bad faith, or if he/she was negligent on his acts (or omissions), and those acts caused a damage to a third party, to the company, or to the shareholders, He/She might be liable for his acts (or omissions). The liability will be equivalent to the damage caused, but only if there is a direct connection between the act or omission, and the damage caused (cause/effect direct relation).
If there is a Board of Directors, the liability will extend to all of its members, except to those who expressly showed opposition to the act (or omission).
- Liability based on the breach or non compliance of certaing legal provisions (Responsabilidad Objetiva).
Directors must call for the Assembly of Partners to adopt certain decisions, when the company is on a “Dissolution Situation” (“Causa de Disolución”). They have two months since they know (or they should have known) the company is in this situation to promote the celebration of this Assembly of Partners, that should decide wether to (i) dissolve the company, (ii) balance its financial statements through a capital increase, a capital decrease, or both, in order to compensate accounting losses, or (iii) to promote an insolvency process.
They will be liable for the company’s debts with third parties, if they:
o Do not promote the celebration of the Assembly of Partner, or
o Do not promote the dissolution of the company before the courts (or an insolvency process), when the Assembly of partners does not approve the dissolution of the company.
This is a objective-type liability, since the creditors do not have to prove the existence of a cause-effect relation, between the omission of the Director’s obligation and the damages (debts) caused.
The “Dissolution Situations” are defined in clause 104 of the Limited Liability Company’s Act, as follows:
o When, as consequences of accounting losses the net asset value of the companies is reduced in more than half the capital of the company.
o Inactivity of the company.
o Decrease of the Capital Stock under the minimum stablished in the law (3.005,06 euros)
The directors will only be liable for those debts acquire after the “Dissolution Situation” happens.
