The liability of company directors is not merely a legal concept; it can have direct financial consequences for those who hold the position. With the end of the moratorium that suspended the calculation of losses for 2020 and 2021, claims against directors who fail to fulfill their duties are being revived.
Is your company prepared for this situation?
What is an individual liability action and why does it matter to you?
An individual liability action, regulated by Article 241 of the Spanish Companies Act (‘LSC’), enables shareholders and third parties to claim compensation directly from directors for direct losses arising from acts or omissions contrary to their duties.
Key requirements:
- Direct damage to the assets of the shareholder or creditor.
- Wilful misconduct or negligence on the part of the director.
- Causal link between the conduct and the damage.
Important: The company’s insolvency alone is insufficient; direct damage to the assets of the affected party must be proven. This means that directors may be liable with their personal assets.
Who can file a claim and in what cases?
- Shareholders: when they suffer direct damage, such as being deprived of voting rights or denied agreed dividends.
- Creditors: if the director’s actions cause them direct harm. Mere non-payment is insufficient; there must be unlawful conduct (e.g. concealment of information, provision of false data or breach of legal duties).
Common scenarios:
- De facto closure of the company.
- Losses reducing net assets to less than half of the share capital.
- Failure to comply with insolvency duties.
Why act now?
With the end of the moratorium, risks are increasing significantly. A preventive review can protect directors from personal liability and shield the company from costly litigation.
How can we help you?
At AGM Abogados, we design prevention and defence plans for directors and companies:
- Audit of directors’ duties and risk exposure.
- Protocols to avoid claims.
- Advice on restructuring and regulatory compliance.
- Defence in legal proceedings.
For further information and trusted legal advice regarding corporate law, get in touch with AGM Abogados here.
