A debt liability action protects shareholder credit when there is a breach by the company director of his obligation to dissolve the company and there are legal grounds for dissolution. This is established in article 363 of Spanish Corporation Law, but it is only valid with regard to loans that are outstanding after the company has been dissolved.
When the responsibility of the company director emerges concerning the matter of loans or debts arising after the legal cause of dissolution occurs, the key question is to establish the time element, that is to say the date of the awareness of insolvency. This is not always easy to identify with precision. We draw the reader’s attention here to the ruling of the Supreme Court 151/2016 of March 10, 2016, which pronounced for the first time on the time element, establising that the objective responsibility on the part of company directors not only covers the contractual obligations, but also the “ex lege” such as those derived from non-contractual liability or liability by a third party.
The function of the ruling is to stimulate the dissolution or winding up of the company or application of the creditors’ insolvency arrangement for the companies when a legal cause exists because, if they do not adopt the relevant measures to obtain the dissolution and liquidation of the company or a declaration of the creditors’ insolvency arrangement and if the company continues to develop its activity with substantially lower capital asset than its share capital and this is presumed insufficient to meet its obligations, the company directors must respond jointly and severally to the obligations arising after the dissolution, including those of a contractual nature as well as those that are of a different kind.
Within this general framework, the ruling effectively has a disincentiving effect on the taking on of new contractual obligations on the part of the company, but it is not its only function. As regards temporality, it determines what is relevant to deciding whether the obligation regarding declaring insolvency should take place at an earlier point or a later one but not its full accrual or enforceability.
This debt liability action can be initiated by the shareholders that have credits or debts with the company after the occurrence of any of the causes of dissolution, presumed as such by Spanish Corporation Law, unless otherwise proved by the company director. The mentioned causes are that they prove that they are of an earlier date; that the company director has not convened the General Meeting for the adoption of the dissolution or removal agreement of its causes; that two months have elapsed since the cause of dissolution; that passive conduct is attributable to the administrator ; and that there is no cause to justify omission.
It is important to mention the incompatibility of this action of objective responsibility when the company is in the process of a creditors’ insolvency arrangement, suspending the actions of objective responsibility or debts that are being processed, and the new actions of objective responsibility being not admitted to the process, both until the conclusion of the credit’s insolvency arrangement.
