About the liability of individuals representing the director in legal entities

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AGM Abogados

Pursuant to art. 236.5 of Corporate Enterprises Act (LSC) introduced by Law 31/2014 of 3rd of December, which has come into force on 24th of December of 2014, foresees that “the individual charged with permanent exercise of managing tasks in legal entities must comply with director legal requirements and duties and will be jointly liable with the managing legal entity”.

As well as this, the representative (individual) of the managing legal entity will be considered for these purposes as if he personally is the administrator.

This conclusion seems obvious in case of social liability due to non-comply with managing duties provided for in articles 225 et seq. and in art. 367 and concordant provisions of LSC (for not having called in the term the General Meeting to agree with the dissolution or for not having promoted the judicial dissolution when the General Meeting does not agree and/or for not having applied for bankruptcy proceeding on behalf of the managed company, if appropriate).

Therefore, it should be pointed out that as it is a sanctioning rule it will not apply retroactively but only to facts, actions, non-compliance misconducts or debts OWED since the entry into force of art. 236.5 LSC. Contrariwise, it would represent a violation of legal certainty and effective legal protection principles.

Consequently, the representative of the director in a legal entity will be liable ex art. 367 LSC only for debts held since the entry into force of art. 236.5 LSC, that is to say from the 24th of December of 2014 but not for previous debts.

Then, other types of liabilities (individual or corporate liability action against the director) for non-compliance with the duties provided for in art. 225 and seq. of LSC, will be claimed only since the entry into force of the sanctioning rule.

On the contrary, according to bankruptcy law profiles and to Section 28 of Audiencia of Madrid and Section 15 of Audiencia of Barcelona case-law, the exemption of liability foreseen in art. 236.5 LSC does not apply in the bankruptcy proceeding, due to the lack of references to it in Bankruptcy law that however provides for punish the misconducts of the de facto manager.

Finally, the individual representing the managing legal entity will be liable as de facto manager ex art. 165.5 Bankruptcy law, for having produced or compounded insolvency status or for any other misconduct provided for in articles 164 and 165.  Despite the fact that there is literature arguing that insolvency liability means social liability in bankruptcy proceedings – with its own features- the above-mentioned conclusion is backed by Spanish Courts that consider that art. 236.5 LSC does not to bankruptcy manager liability and restricts the effects to social liability.

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