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Is the administrator responsible for the company's debts?

In this article we will talk about the responsability of the administrators for the debts of the company, that is to say, if the administrators are going to respond jointly with their personal assets for the debts contracted by the company they were administrating, or only the company must respond.

The Law on Corporations (LSC) establishes that companies that are regulated by means of corporations or limited responsability companies must be compulsorily dissolved in a series of cases (art. 363 LSC), among which we highlight the most common ones:

a) For the cessation of the activities that constitute the corporate purpose. In particular, it will be understood that the cessation has taken place after a period of inactivity of more than one year.

b) Losses that reduce the net worth to less than half of the share capital.


How should the company's director act in the event that the company is in the process of being dissolved?

As our expert in Commercial Law tells us, the administrator would have to call the General Meeting of the Company within a maximum period of 2 months from the knowledge of the cause of dissolution, so that the dissolution of the Company can be definitively adopted. At the General Meeting, the dissolution can be requested by the courts, but in the case that it is necessary, the bankruptcy proceedings can also be requested.


What happens in the event that the Company's Directors decide not to call for dissolution or an application for bankruptcy proceedings?

The directors will be jointly liable for the company's debts if they do not comply with the obligation to call a general meeting within two months in order to adopt, if appropriate, the resolution of dissolution, as well as the directors who do not request judicial dissolution or, if appropriate, the company's bankruptcy proceedings.

To avoid this situation, Forcam Abogados advises to act with speed and determination and to seek professional advice as soon as possible.


Where is it regulated?

In article 367 of the Law on Corporations, it literally states

Administrators who do not comply with the obligation to call a general meeting within two months to adopt, if appropriate, the resolution of dissolution, as well as administrators who do not request judicial dissolution or, if appropriate, the bankruptcy of the company, within two months of the date scheduled for the meeting, when the meeting has not been held, or from the day of the meeting, when the resolution would have been contrary to the dissolution, will be jointly liable for the corporate obligations subsequent to the occurrence of the legal cause for dissolution. 

 In these cases, the corporate obligations claimed will be presumed to be dated after the legal cause for dissolution of the company has occurred, unless the administrators can prove that they are dated earlier.


What does case law establish about the liability of directors?

In order to take legal action, the directors must have failed to comply with the duty to promote the dissolution, when there is a legal cause for doing so.

Its importance is particularly evident in cases of losses that reduce the net worth to less than half of the share capital, unless the balance of the assets is established through an operation to reduce or increase the share capital, and provided that it is not appropriate to request a declaration of bankruptcy.


We remind you that at Forcam Abogados our lawyers specializing in commercial law will be able to clarify any doubts you may have in your specific case.

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