Section 15 of the Provincial Court of Barcelona, pursuant to Judgment no. 1068/2021 of 27th July (ECLI: ES: APB: 2021: 9493, the “Judgment”) resolves an appeal in which the action of claim for payment filed against the company was upheld in first instance, although the action of strict responsibility filed against the company director was dismissed, under article 367 of the Spanish Companies Act (Ley de Sociedades de Capital – LSC), on the understanding that failure to file the annual accounts for the 2019 financial year was not relevant, due to the application of the Covid-19 regulations, which allowed an extension of said obligation for three months, as from 1st June 2020.

The claimant party founded its appeal in the argument that, without prejudice to the application of the extension for the filing of annual accounts provided for in the Covid-19 regulations, the presumption established in section 2 of article 367 of the LSC should continue to operate, according to which it is up to the defendant director to deploy the evidentiary activity to disprove the claim and to prove, with the available accounting documentation, that the company was not found to be in a cause of qualified losses before incurring debt.

In the third Legal Ground of the Judgment the Court analyses the nature and the requirements of director responsibility regulated in article 367 of the LSC.

With regard to the nature, the court explains that it is a matter of ex-lege  or strict liability, the basis of which is non-fulfilment, by the directors, of the duty imposed upon them by Law to call a general meeting within the term of two months from the moment in which the existence of grounds for the imperative winding up of the company are determined, without it being necessary to demonstrate that damage has been produced, nor the causality relationship, nor the existence of fault in the actions of the director.

And as for the requirements, it deems it necessary:

  1. To prove the existence of a debt held by the company, in favour of the claimant creditor.
  2. That the defendant director was so at the time that the cause for winding up was determined and also during the following two months.
  3. That the director allows this period to elapse without calling a general meeting to pass the resolution for the winding up or that the cause is removed.
  4. That the application of the presumption that the claimed debt was contracted or arose subsequently to the occurrence of a legal cause for winding up.

The Court carries out the following assessments:

  • The existence of an extension to the term for the formal obligation of drawing up and filing annual accounts on the occasion of the declaration of a state of alert in March 2020 does not eliminate the presumption established in article 367.2 of the LSC nor the obligation of the defendant to prove that, at the time of contracting the obligation, the company was not subject to legal grounds for winding up.
  • In accordance with the principle of ease of providing evidence established in article 217.7 of the Civil Procedure Law (Ley de Enjuiciamiento Civil – LEC), the lack of drawing up and filing must be detrimental to the person, who as director of the Company, has access to said sources of evidence, so that the lack of drawing up the accounts in this case (the company had filed for and obtained a declaration of insolvency and the closing of the procedure due to a lack of available assets), is sufficient reason to presume that the debtor company was subject to legal grounds for winding up at the time the corporate obligation emerged.

It refers to Judgment of 24th March 2017 (ECLI: ES: APB: 2017:772), which establishes that:

“The absolute non-fulfilment, as is the case, of the accounting obligations of an orderly and diligent entrepreneur (articles 25 and thereafter of the Commercial Code and article 253 of the LSC) and the evident ease of proving evidence available to the company director (217.6 LEC) must bring with it a reversal in the burden of proof, it being the director who must prove the state of solvency of the company which they direct, or the equity balance required by the regulations, and who otherwise must bear the negative consequences of the lack of evidence of such facts …”

  • The presumption established in article 367.2 of the LSC must apply, with no documentary accounting evidence which may undermine said presumption having been provided.
  • The diligence required of the director implies the obligation to have a timely and appropriate knowledge of the accounts which must be kept, in accordance with the principles of veracity and true and fair view, in compliance with accounting standards. The knowledge that the company is subject to grounds for winding up due to losses must be acquired through accounting procedures and the accounting tools provided for in the law, which facilitate the knowledge regarding the asset situation and financial circumstances of the company. The relevant part is not when knowledge of the grounds for winding up due to losses was acquired, but rather when such knowledge should have been acquired.

Thus, the Court of Appeal, upheld the action of strict responsibility brought against the director and declares that the director must be responsible for the corporate debt claim.

 

 

Mireia Bosch

Vilá Abogados

 

For more information, please contact:

va@vila.es

 

26th November 2021