Spanish laws have always demanded responsibility or liability from managers of commercial firms. But this liability has become increasingly complicated by successive regulations wanting to increase the protection of the company, its shareholders, employees, creditors or third parties in general.

1.- Extent of liability

Spanish Public Limited Companies (SA or PLC) or Spanish Limited Companies (SL or Ltd) limit managers and partners liability. This objective has been exceeded by other things, like the firm’s security or recovery of claims, creating an increase in managers’ and partners’ liability

Managers take on more obligations and responsibilities in Spain. The old Corporation Law (LSA) from 1989 made the situation worse. It was tightened up with revisions introduced in the 2003 Corporations Transparency Law and the new Capital Companies Law (LSC) passed in 2010.

2.- Direct Liability

2.1.- The new Spanish Capital Companies Law (in the same way as the 2003 Transparency Law) orders managers to discharge their duty with the diligence of a respectable businessman and loyal representative. The Transparency Law demands managers to be diligently informed about the running of the company.

2.2.- The new Capital Companies Law demands a duty of diligence. It includes the obligation to be informed on the running of the company. The duty of loyalty is connected with social interest, understood as company interest, and complies with duties imposed by laws and statutes: Art. 226 Spanish Capital Companies Law.

2.3.- The new Law also draws together the managers’ obligations of reporting any conflict, direct or indirect, which they can have with company interests or their participation (or interest) in companies within a similar objective: Art. 229 Spanish Capital Companies Law.

The commitment to the secrecy of confidential information and confidentiality is regulated

2.4.- The new Capital Companies Law, the same as the old Corporation Law, establishes two types of managers liabilities which incorporate those of limited companies: direct and through company debts.

2.5.- The 2003 Transparency Law modified several articles from the old Corporation Law increasing traditional demands on managers liability. This is also brought together in the new Spanish Capital Companies Law.

Managers are responsible for their actions such as, if they are contrary to the Law or company statutes or if they are carried out without performing their duties: Art. 236 Spanish Capital Companies Law.

2.6.- Managers can be sued by the company, shareholders or the company´s creditors.

The company could start a lawsuit when the Board approves it. Prior approval of the accounts or management does not prevent a liability claim. Shareholders can exercise CORPORATE LIABILITY when the company does not do it.

The company’s creditors can also exercise corporate liability if (a) the company or the shareholders do not exercise it,  (b) the company´s assets cannot be recovered.

2.7.- In addition to this company action, creditors and partners have INDIVIDUAL LIABILITY if managers have directly damaged their interests.

3.- Liability for Company Debts

3.1.- Should the company have losses and the asset value is reduced to less than half of the company’s capital, the latter should be increased (contributing goods) or reduced (adjusting real assets).

3.2.- Managers can call a corresponding Annual General Meeting (AGM).

If they do not do this, (or the company does not approve the proposal) and continue into a situation of liquidation, the managers have two months to call an AGM which can agree to dissolution.

If they do not do this or do not ask the Courts to decide, managers may still be liable for company’s debts: Art. 367 Capital Companies Law.

4.- Extra-Contractual Public Liability

Art. 1902 of the Civil Code establishes general liability for people in cases where damage has been caused against another person through their fault or through negligence. This liability affects managers not only through their own actions but also due to damages caused by employees through their work: Art. 1903 Civil Code.

Santiago Nadal