Liability of directors for post-termination debts

Liability of directors for post-termination debts
Published on: 13 February 2014

Table of contents

Liability of directors
for post-termination debts

The action brought for the liability of the directors of a public limited company provided for in art. 265.5 TRLSA, which currently corresponds to art. 367 LSC, requires that the directors have failed to comply with their duty to promote dissolution, there being one of the legal grounds for doing so.

Thus, while the defendant directors were in office, the company must have incurred in any of the causes for dissolution contained in numbers 3, 4, 5 and 7 of section 1 of art. 260 TRLSA EDL 1989/15265 (currently the causes for dissolution are regulated in art. 363 LSC). 3º, 4º, 5º and 7º of section 1 of art. 260 TRLSA EDL 1989/15265 (currently the causes for dissolution are regulated in art. 363 LSC). Also in the present case, the cause invoked was that of no. 4 of art. 260. 1 TRLSA EDL 1989/15265, in the wording given by Law 22/2003, of 9 July ("for losses that leave the net assets reduced to an amount less than half the share capital, unless this is increased or reduced to a sufficient extent, and provided that it is not appropriate to request the declaration of insolvency in accordance with the provisions of Law 22/2003, of 9 July EDL 2003/29207, Insolvency Law"), which the complaint states was applicable during the 2004/2005 season, when the defendants were administrators.

Responsabilidad de AdministradoresIn the event of this legal ground for dissolution, the specific duties that art. 262 TRLSA EDL 1989/15265, in sections 2 and 4 (corresponding to the current articles. 365 and 366 LSC), imposed on the directors were: i) firstly, to convene the general meeting within two months to adopt the dissolution resolution; ii) if the meeting could not be held, to request judicial dissolution within two months from the date scheduled for the meeting; and iii) if the meeting had been held but the dissolution resolution had not been adopted or the resolution had been contrary, to request judicial dissolution within two months from the date of the meeting.

In this case, it was accredited in the instance that the defendant administrators did not call the meeting to agree the dissolution, that is, they failed to comply with the first legal duty related to the promotion of the dissolution. Consult any of our Law Firms in Madrid on issues related to the present case.The controversial issue lies in determining the scope of liability, i.e. for which debts of the company the administrators who failed to comply with the legal duty to promote the dissolution will be jointly and severally liable, and specifically whether this liability includes the claimant's credit, which arose after the administrators' dismissal.

Under the regulation of art. 262.5 TRLSA EDL 1989/15265 prior to the reform of Law 19/2005, of 14 November EDL 2005/165466, which would be applicable to the case if the cause for dissolution had occurred in the 2004/2005 season, as the plaintiffs claim, and therefore prior to the entry into force of this reform, the directors "shall be jointly and severally liable for the company's obligations", in general, without the regulation making any distinction. Whereas after the reform of Law 19/2005, of 14 November EDL 2005/165466, which would operate if the cause for dissolution had appeared in the 2006/2007 season, the liability of art. 262.5 TRLSA EDL 1989/15265 is limited "to the company's obligations subsequent to the occurrence of the legal cause for dissolution" (this has been transferred to the current 367 LSC).

But in any case, both before and after Law 19/2005 of 14 November 2005 EDL 2005/165466 , this liability does not extend to the company's obligations subsequent to the termination of the administrators. That is to say, the company directors, even if they had breached the duty to promote dissolution, once they have left office, are not liable for the debts that the company may incur after they have left office, but only for the debts that existed while they were directors (after the reform of Law 19/2005, of 14 November EDL 2005/165466, this liability is also limited to the debts after the cause for dissolution has arisen).

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