Corporate liability action, as set out in Article 238 of the Spanish Companies Act (“LSC”), is a mechanism to remedy damage caused to the company’s assets by acts or omissions of its directors. Its purpose is to protect the common interest and ensure transparency in management.
Does your company have mechanisms in place to prevent internal conflicts and litigation?
What is the corporate liability action and when is it triggered?
It applies when:
- The director’s conduct is contrary to the law, articles of association, or principles of diligence.
- Damage is caused to the company’s assets.
- There is a direct relationship between the action and the damage.
Unlike individual liability actions, the damage here affects the company itself, not shareholders or creditors directly.
Who can exercise it?
- General Meeting: by resolution.
- Minority shareholders holding at least 5% of the share capital (3% in listed companies).
- Creditors may act on a subsidiary basis when the company’s assets are insufficient to satisfy their claims.
Protection of minority shareholders:
If the directors fail to convene a meeting, shareholders may do so themselves or apply directly to court.
Business judgement rule
Article 225 of the LSC requires directors to act as a ‘reasonably diligent business person’: making informed decisions, exercising effective supervision, and ensuring regulatory compliance.
The business judgement rule (Art. 226 LSC) protects strategic decisions provided four conditions are met: good faith, absence of personal interest, sufficient information, and an appropriate decision-making process.
Case law:
- Supreme Chamber Judgement Nº 1090/2025, 9 July 2025: Discretion does not shield legal violations.
- Supreme Chamber Judgement Nº 443/2023, 31 March 2023: Failure to implement internal controls breaches the duty of diligence.
These rulings reinforce that diligence includes ensuring regulatory compliance and establishing control systems.
Why is this crucial for your company?
In companies with minority shareholders, the lack of control mechanisms generates internal conflicts and costly litigation. Prevention is more cost-effective than litigation.
How can we help you?
At AGM Abogados, we offer:
- Good corporate governance protocols.
- Review of directors’ duties and risks.
- Advice on corporate conflicts and legal defence.
For further information and reliable legal advice on corporate law, please contact AGM Abogados here.
