May 2, 2017
The title of this article is the reality we all face as lawyers in this country. We have a judicial title, initiate execution, and the executed company does not have assets to liquidate the credit. The result: dissatisfaction from the client who does not understand how they have "won" a case but cannot collect.
Well, beyond the cases of possible criminal responsibility of the company administrator—always keeping criminal law as the last resort—for possible frustration of the execution under articles 257 and 258 of the Penal Code, punishable insolvencies under articles 259 to 261 bis of the Penal Code, or possible mismanagement under article 252 of the Penal Code, there is the possibility that the company administrator may be civilly liable for their actions, in accordance with the Capital Companies Act (hereinafter LSC), through the well-known formula of derivative responsibility against the administrator.
Given the brevity of this article, we will briefly explain the two actions that the LSC contemplates for claiming the responsibility of the company administrator, which, as is well-established and reiterated jurisprudence, are two separate and differentiated actions. - See, for example, the difference between both actions in STS 396/2013 -.
The first of these is known as "liability for debts," exercised through articles 363 and 367 LSC, which states that administrators who fail to call the general meeting within two months to adopt, where appropriate, the dissolution agreement, as well as administrators who do not request judicial dissolution or, if applicable, the company's bankruptcy within two months, will be liable for "social obligations after the occurrence of the legal cause for dissolution."
It is important to highlight in this regard that paragraph 2 of article 367 LSC contemplates the reversal of the burden of proof, meaning the administrator will have to prove that the debts incurred are prior to the legal cause of dissolution or the obligation to request bankruptcy.
The legal causes of dissolution are listed in article 363 LSC, and among them, it is common in practice to encounter claims for cases under subsection e) "losses that reduce net equity to an amount less than half of the share capital."
Regarding the request for bankruptcy, article 5 of the Bankruptcy Law provides that: "The debtor must request the declaration of bankruptcy within two months following the date on which they became aware or should have become aware of their state of insolvency."
Thus, we see how the norm favors the claimant in exercising this action, and contrary to the general rule of article 217.2 LEC, makes the administrator responsible for the burden of proof, having to prove that the debt incurred was prior to the cause of dissolution or bankruptcy. Furthermore, jurisprudence does not require the conditions for the action of article 236 LSC that we will see below, having even categorized the action of article 363 LSC as an objective or quasi-objective liability in the cases of article 367 LSC - See STS No. 103/2007, or STS No. 151/2016 -.
Despite the above, a common mistake made by lawyers when exercising this action is not knowing what jurisprudence understands by the temporal moment of the generation of the social obligation.
Thus, it is important when exercising this action to know that the First Chamber of the Supreme Court indicates that the moment of generation of the social obligation is not when the debt has been judicially recognized, but the true moment is that of the birth of the company's payment obligation. - See in this regard, STS No. 144/2017; or STS No. 151/2016 -.
That is, for example, in a claim through a payment order procedure, it will not be necessary to check if on the date the order recognizing the debt was issued, the company was in a cause for dissolution or bankruptcy, but the court will have to check if on the date the debt is due, for example, by the issuance of invoices or by the agreed payment date, the company is in one of the causes provided in article 367, that is, dissolution or bankruptcy.
The second of the actions is the so-called "liability for damages" action under article 236 and following LSC, which the legislator specifies with respect to the generic one provided in article 1902 CC.
First of all, it should be noted that article 225 LSC regulates the duty of diligence of the company administrator, stating that they "must perform the role and fulfill the duties imposed by the laws and the statutes with the diligence of an orderly businessman, considering the nature of the role and the functions assigned to each of them."
Article 236 LSC "provides that administrators will be liable to the company, to the shareholders, and to the social creditors for the damage they cause by acts or omissions contrary to the law or the statutes or by those performed in breach of the duties inherent to the role, provided there is fraud or negligence."
Article 237 LSC confirms the joint liability of administrators.
Article 238 LSC regulates the action that the company has to demand responsibility from the administrators, and article 239 empowers shareholders to individually or jointly, subsidiarily, initiate the action of responsibility in defense of the social interest when the company does not exercise it.
Article 240 LSC includes the subsidiary legitimacy of creditors to exercise the social action "when it has not been exercised by the company or its shareholders, provided that the social assets are insufficient to satisfy their claims."
Article 241 LSC contemplates the widely used individual action of responsibility, allowing shareholders and creditors to directly seek compensation from the administrators—not requiring that the company or shareholders have not exercised it—provided that their action directly harms their assets.
In other words, the action of article 241 LSC is the action we exercise when, as a result of the administrator's negligent actions, the shareholder's or creditor's assets suffer direct damage.
Before analyzing the requirements of the action of article 241 in relation to article 236 LSC, it should be noted that it is well-established and reiterated jurisprudence of the First Chamber of the Supreme Court not to apply the individual liability of administrators indiscriminately for any breach within a legal entity, since "this would contravene the fundamental principles of capital companies, such as their legal personality, their patrimonial autonomy, and their exclusive responsibility for social debts, or overlook the principle that contracts only produce effects between the parties that grant them, as proclaimed in article 1257 CC." - See, among others, STS 472/2016; 253/2016; 131/2016 -.
The requirements demanded by the First Chamber of the Supreme Court to determine the individual responsibility of the administrator, as confirmed by the recent Plenary Judgment of the First Chamber of the Supreme Court No. 472/2016 of July 13, 2016, Rapporteur: Hon. Mr. Ignacio Sancho Gargallo, are:
"i) an active or passive behavior of the administrators; ii) that such behavior is attributable to the administrative body as such; iii) that the administrator's conduct is unlawful by violating the law, the statutes or not conforming to the standard or pattern of diligence required of an orderly businessman and a loyal representative; iv) that the unlawful, culpable or negligent conduct is capable of causing damage; v) the damage inferred must be direct to the third party contracting, without the need to harm the interests of the company; and vi) the causal relationship between the administrator's unlawful conduct and the direct damage caused to the third party."
Therefore, the claimant must prove the administrator's liability according to the mentioned requirements.
However, in these cases, neither the parties nor the courts should forget what jurisprudence states about the rules on the availability and ease of proof by the defendant administrator under article 217.7 LEC, often being better prepared to prove what happened, with the omission of the application of this rule sometimes being a reason to appeal to the Supreme Court through extraordinary procedural infringement.
A typical example of a case for claiming responsibility under article 236 and following LSC could be one where the administrator, with an acknowledged creditor's claim, does not proceed to liquidate the company's assets to pay the debt, letting the company "die," leading to a de facto closure, known in practice as "closing the shutter," without initiating the company's dissolution-liquidation or requesting bankruptcy, without explaining the fate of the assets held, causing direct damage to the creditor, who, in the total absence of assets to seize, loses all expectation of payment if the responsible party is the legal entity.
Ignacio Montoro Iturbe-Ormaeche | Specialist in Economic Criminal Law and professional civil liability
