I.    INTRODUCTION

Law 38/2011 of 10th October, reforming Spanish Insolvency Act 22/2003 (hereinafter referred to as “SIA”) introduces a series of modifications in relation to the functioning of legal actions for company director responsibility, regulated in the Capital Companies Act (hereinafter referred to as “CCA”), within insolvency proceedings. In the following, the articles of the SIA, which, regarding this area, were object of modification following said reform, shall be analysed.


II. NEW INSOLVENCY SYSTEM FOR LEGAL ACTION FOR COMPANY DIRECTOR RESPONSIBILITY.

1. Company legal action for responsibility (regulated in article 238 of CCA).

New article 48 Quater of the SIA attributes the Insolvency Administration an active, exclusive and excluding capacity in order to exercise, before the directors, auditors and liquidators, company legal action for responsibility for damages to the insolvent company. The new article 8.7 of the SIA, for its part, attributes the Judge of the insolvency proceedings, exclusive and excluding competence to hear such legal actions for damages to the insolvent company, before or following the declaration of insolvency, by the receivers or liquidators. In turn, the new article 51.1 of the SIA creates the possibility for an ex officio accumulation to said insolvency proceedings of legal actions of this type initiated before the insolvency proceedings.

2. Individual legal action for responsibility (regulated in article 240 of CCA).

Individual legal action for responsibility for damages is difficult to articulate following the declaration of insolvency because of the harm that it may do to the “pars conditio creditorum” (equal treatment of creditors), due to the possibility that one creditor, whose interests have been damaged, may be favoured in detriment to the rest of the creditors in a claim procedure running parallel to the insolvency proceedings. The SIA does not anticipate this type of supposition, neither does it anticipate the exclusive judicial competence of the Insolvency Judge, nor the exclusive capacity of the receiver, thus any affected creditor may initiate an individual legal action for damages against a company director, before the appropriately competent Courts.

3. Legal action for responsibility regarding debt (regulated in article 367 of CCA).

With reference to legal action for responsibility regarding debt, arising from the non-fulfilment of legal obligations by a director (in cases of concurrence of grounds for dissolution), the new article 50.2 of the SIA establishes that no commercial court shall admit claims of this type to procedure, once insolvency has been declared. Legal action of this kind which may already be found under procedure at the same time as the declaration of insolvency, shall be suspended during the insolvency proceedings and until their conclusion, pursuant to new article 51 bis.

As it may be seen, a clear coordination between the insolvency proceedings and the company legal action for responsibility and legal action for debt responsibility exists; however, the same is not true of an individual legal action for responsibility for damages, which may continue to be instigated after the declaration of insolvency, and in cases where a claim may already have been filed beforehand, ordinary procedure shall continue. In this case, a risk exists that following the enforcement of said individual legal action, the directors may be deprived of capital with which to respond, as “affected persons” in the negligent insolvency classification judgement.

4.    Coordination of individual action for responsibility in the insolvency classification section.

With the new wording of article 172 bis of the SIA, the receivers or liquidators who may have held said condition for two years prior to the declaration of insolvency, and which may be declared to be “affected person” by the negligent insolvency classification, may be found guilty for responsibility for company debts; that is to say, they may be ordered to pay the insolvency creditors a part or the entirety of the capital deficit following liquidation. This new prevision of the SIA regarding classification, constitutes a severe instrument to be applied with discretion by the Insolvency Judge in the classification sentence, only in the most serious insolvency cases.

III. CONCLUSION.

In accordance with the above, diverse doctrine and case law support not initiating individual legal action for responsibility while insolvency proceedings are in force,  in order to avoid asset stripping of the company directors (in favour of one sole creditor), and so that in turn, they would be unable to respond to a possible order to pay the asset deficit from the negligent classification. In order to avoid said negative consequences for the creditors as a whole, it would be necessary to bring before the Judge hearing the case of individual legal action for responsibility a possible civil first ruling, pursuant to article 43 of the Spanish Civil Procedure Act, for the suspension of the procedure against the director until his possible responsibility has been clarified in the insolvency proceedings. 

 

Vilá Abogados

 

For more information, please contact: 

va@vila.es

 

19th of April 2013