The legal regime of director liability

Under current regulations, company directors are liable for the company's debts in different cases. From the commercial point of view, there is a basic regulation, which is the current Capital Companies Act.

According to the same, the directors who fail to comply with the obligation to call a general meeting within two months to adopt, where appropriate, the resolution to dissolve the company, and the directors who do not request the judicial dissolution or, where appropriate, the company's insolvency proceedings, within two months from the date scheduled for the meeting, when the meeting has not been held, or from the day of the meeting, when the resolution has been against dissolution, shall be jointly and severally liable for the company's obligations subsequent to the occurrence of the legal cause for dissolution.

In these cases, the corporate obligations claimed shall be presumed to date from a date subsequent to the occurrence of the legal grounds for dissolution of the company, unless the administrators can prove that they date from an earlier date.

The legal grounds for dissolution are as follows:
Dissolution due to the existence of a legal or statutory cause.
Capital companies shall be dissolved on the existence of legal or statutory grounds duly established by the general meeting or by court order.

Liability of Directors

Causes for dissolution

  1. The capital company shall be dissolved:
    • By the conclusion of the business which constitutes its object.
    • On the manifest impossibility of achieving the corporate purpose.
    • If the corporate bodies are paralysed in such a way that it is impossible for them to function.
    • By losses that reduce the net assets to less than half the share capital, unless the latter is increased or reduced to a sufficient extent, and provided that it is not appropriate to apply for a declaration of bankruptcy.
    • By reduction of the share capital below the legal minimum, which is not a consequence of compliance with a law.
    • Because the nominal value of the non-voting or non-voting shares exceeds half of the paid-up share capital and the proportion is not restored within two years.
    • For any other reason stipulated in the articles of association.
  2. A limited liability partnership shall also be dissolved if it fails to carry on the activity or activities constituting its corporate purpose for three consecutive years.
  3. A limited partnership limited by shares shall also be dissolved upon the death, termination, incapacity or the opening of the liquidation phase in the insolvency proceedings of all the general partners, unless within six months and by amendment of the articles of association a general partner is incorporated or it is agreed to convert the partnership into another type of company.

Resolution on dissolution

In the cases provided for in the preceding Article, dissolution of the company shall require a resolution of the general meeting adopted with the ordinary majority established for limited liability companies in Article 198, and with the quorum and majorities established for public limited companies in Articles 193 and 201.

Duty to convene

  1. The directors must convene the general meeting within two months to pass a resolution to dissolve the company or, if the company is insolvent, to file for insolvency proceedings.
    Any shareholder may request the directors to convene a general meeting if, in his opinion, there are grounds for dissolution or if the company is insolvent.
  2. The general meeting may adopt the dissolution resolution or, if it is on the agenda, such resolution or resolutions as may be necessary to remove the cause.

Judicial Dissolution

  1. If the meeting is not called, is not held, or does not adopt any of the resolutions provided for in the preceding article, any interested party may request the dissolution of the company before the commercial court of the company's registered office. The application for judicial dissolution must be directed against the company.
  2. The directors are obliged to apply for judicial dissolution of the company when the company's resolution is contrary to dissolution or cannot be achieved.

The application must be made within two months of the date on which the meeting is scheduled to be held, if the meeting has not been convened, or from the day of the meeting, if the resolution is contrary to dissolution or has not been adopted.

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