BackThe directors of capital companies are responsible for the correct management and representation of the company and, if they fail to do so in accordance with the bylaws or the Law, both shareholders and creditors may hold them liable. In this case, we will analyse the possible joint and several liability for corporate debts that may be incurred by the members of the management body.
The liability contained in article 367 of Royal Legislative Decree 1/2010, of 2 July, approving the revised text of the Capital Companies Act, establishes that directors who fail to comply with the obligation to call a General Meeting within two months of the existence of the dissolution cause or, from the date of their appointment, in the case of appointment after the cause, shall be jointly and severally liable for the company’s debts incurred by the company thereafter.
It also establishes that, if the General Meeting is not called or takes place and the dissolution is not agreed or the cause is revoked, the director will be jointly and severally liable for the debts if he does not request the judicial dissolution within two months from the date on which the General Meeting should have been held or the date on which it should have been held.
This article appeals directly to the duty of diligence that the directors must have, as it is essential for them to know the status of the company in order to avoid incurring in liability. This is due to the fact that the directors will begin to be jointly and severally liable from the moment they know or should know of the concurrence of the cause, applying as a criteria the diligence of an orderly businessman, which is greater than the diligence of a father of a family.
A director who is a member of the management body at that time is considered to be jointly and severally liable for the debts until he or she resigns or is removed by the general meeting. The same would not apply to directors whose term of office has expired, who could still be held jointly and severally liable.
Joint and several liability would include those debts incurred after the occurrence of the cause for dissolution and not all corporate debts. In this sense, those debts acquired prior to the occurrence of the cause that have effects afterwards, such as a loan, could not be demanded from the directors in this way.
This type of liability can be demanded from directors without there being damage or harm to a third party by the improper action or omission. Liability would arise for breach of the duties inherent in the position held.
In the case of management bodies that require joint or collegial action, those members who wish to fulfil their obligations and avoid possible liability for debts may call the General Meeting as interested parties.
The duty to call would include the mere act of calling the General Meeting and including the dissolution proposal on the agenda. The director would not be required to state the cause of the dissolution, as a generic mention would be enough. Neither would it be necessary to present possible solutions to the cause on the agenda.
In fact, any issue that is not included in the agenda cannot be discussed by the shareholders at the General Meeting. In this regard, shareholders may, upon receipt of the notice of meeting, make proposals to complement the agenda and for these possible solutions to be discussed or for the directors to explain the cause of dissolution in more detail.
In those cases where the company director fulfils his duty late, he would not be exempted from the joint and several liability incurred in the period of non-compliance with the rule, but would avoid additional liability by being exempted from joint and several liability for debts incurred after the late fulfilment.
Conclusion:
According to what has been stated, the directors of capital companies must have a deep understanding of the duties assigned to them by the bylaws and the applicable Law, as any breach of these duties could result in personal liability.
This compliance with the duties must be scrupulous, since most of the time the joint and several liability for the directors’ debts does not arise from a specific action performed by the directors, but from an omission of their duties due to ignorance of their duties or of the situation of the company.
This compliance with the duties must be scrupulous, since most of the time the joint and several liability for the directors’ debts does not arise from a specific action performed by the directors, but from an omission of their duties due to ignorance of their duties or of the situation of the company.
It is therefore important to be well advised or to have a detailed knowledge of the duties and obligations when accepting a position as a member of the management body of a capital company.
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