MANAGEMENT RESPONSIBILITY FRAMEWORK

1. Corporate crimes attributable to directors. In particular, unfair administration and misappropriation

There are numerous corporate crimes attributable to corporate directors. Two of the most frequently committed criminal offences are unfair administration and misappropriation. According to the Supreme Court, the best way to distinguish between them is by considering the degree of intensity of wrongful conduct.

With the reform of the Criminal Code of 2015, the crime of unfair administration has changed from a corporate crime to an offence. The active subject can be any person who, with powers to manage foreign wealth/assets, exceeds their authority in the exercise of their functions.

Typical elements are:

1. Excessive exercise of functions according to the duties of each position.
2. Misconduct with gross negligence and/or negligence.
3. Causes of property damage, with doubts as to whether it also includes loss of profits, in addition to the emerging damage.

2. Management responsibility

2.1 The duty of due diligence has passed into the background.

It will have to be evaluated according to the functions of the director and type of post. Also according to the criteria to avoid the responsibility of the business judgement rule[1]:

• Act in good faith;
• Without personal interest;
• Act with the sufficient training and information to make a decision.

2.2 Intensification of the duty of loyalty according to two pillars:

• The duty of good faith;
• Acting in the interest of the company by establishing expressly what the LSC can and cannot do, as well as the authorisation and dispensation system.

2.3 Liability for damages: aggravation of the system

It is possible to press the corporate liability action (art 238 LSC) or the individual liability action (art 241 LSC) onto the managers. In order to declare liability, the following circumstances must be fulfilled:

• Acting or omission, wrongfulness, damages to the partners or creditors of a company;
• Causal link;
• Misconduct or fault.

Both managers (de facto and de jure) and directors can be responsible.

Period of statute of limitations for action

The period is four years, with two theses around the dies a quo of the action:

• From the moment they stopped providing services by the administrator.
• From the day on which the action could have been taken: it is most preferred and understood to start when real or potential knowledge is obtained.

3. Effects that insolvency has on requests that claim the declaration of responsibility of managers

Some of the consequences of the insolvency declaration are as follows:

• Active legitimacy is restricted exclusively to the insolvency administration (article 48 quater);
• The jurisdiction to hear actions against administrators is the bankruptcy court/judge (article 8.7º LC);
• The procedures in which claims for social obligations have been exercised against managers who have failed to perform their duties when there is a cause of dissolution (art. 51.1 bis LC) are suspended.
• The previous declaratory judgements that are pending will continue to be processed before the same court that is being adjudicated (Article 51 LC). 51.1 bis LC). Exception:
• Judgements to claim damages against the insolvent against its directors will be accumulated to the ex officio insolvency, whenever in the first instance and the trial or hearing has not ended.

[1] The business judgement rule establishes that judges will not review corporate decisions made by company managers if the manager has been properly informed before making the decision, the action is not illegal or contrary to the statutes and the administrator does not have an interest in the matter contradictory to that of the company.

 This rule can be considered equally valid in our Law (SAP Madrid, 13-IX-2007: The “breach or defective performance (of the obligation to administer cannot be determined) depending on the results”.

LEQUID