Following the Supreme Court ruling of March 3, 2016.
In a recent ruling (3/03/2016), the Supreme Court addressed the so-called individual action against directors, provided for in article 241 of the Capital Companies Law (LSC), which literally states the following:
Article 241 Individual liability action
The rights of partners and third parties to claim compensation for acts by administrators that directly harm their interests remain unaffected.
The ruling already addresses the difficulty posed by this action and which behaviors of company directors can be subsumed under the scenario contemplated by the law: “The individual action for liability of directors for acts carried out in the exercise of their corporate activity (…) presents special difficulties in defining the behaviors for which they must be directly liable to third parties, in order to distinguish between the scope of liability incumbent upon the company with which the injured third party contracts and the liability of the directors acting in its name and on its behalf. And we clarify that the individual action for liability, as a form of liability for corporate wrongdoing, understood as that incurred by directors in the performance of their duties, constitutes a special case of extra-contractual liability integrated within a corporate framework, which has its own specific regulations (Art. 135 of the Spanish Companies Act - 241 of the Spanish Companies Act), which distinguish it from the generic liability provided for in Art. 1902 of the Spanish Civil Code (Judgments of this Court of March 4 and May 7, 2004 and April 6, 2005). 2006, among others).
We cannot forget that, ordinarily, the party responsible for damages caused by a company to third parties is the company itself. To hold the directors liable for any breach of contract by the company would undermine one of the fundamental principles of corporations: the legal personality of the company. This principle establishes the company as the autonomous center for the attribution of rights and obligations of its shareholders and directors, in addition to the principle of privity of contract (Article 1257 of the Civil Code). As stated in another Supreme Court ruling (242/2014), “The liability of directors can in no case be linked to the objective fact of the breach or defective performance of contractual relationships, making them guarantors of the company’s debts (...).”
However, as stated in the judgment that is the subject of this post, “(…) Article 241 of the LCS allows for an individual action against the directors when, in the exercise of their functions, they fail to comply with specific rules that are imposed on their corporate activity (…)”
For this liability to arise, the Supreme Court has established that the following conditions must be met: i) culpable or negligent breach of a specific rule by the administrator; ii) that said non-compliant omission is attributable to the administrator as a corporate body; iii) that the culpable or omission is likely to cause harm to third parties; iv) that the harm inflicted on the third party is direct and not indirect through the company; and v) that there is a causal link between the unlawful conduct and the harm caused.
In short, the definition of these restrictive budgets by the Supreme Court – which, as mentioned, aims to preserve the patrimonial autonomy of commercial companies with respect to their directors – means that there are very few factual scenarios that can lead to the directors of commercial companies having to answer for the damages caused by these companies to third parties, limiting them to those cases in which the company directors fail to comply with the legal duties intrinsic to their position and that such non-compliance causes direct damage to those third parties.
Andreu Pujol
Commercial Area – Litigation
Àmbit Assesor
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A Àmbit Assessor, SL has 40 years dedicated to the tax, comptable and labor consultancy of the Pime.
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