It is very common that, in complicated financial and patrimonial situations, the directors of a company persist in maintaining the activity of the company, or give up the situation, leaving the company in a "zombie" situation, surviving on the savings of the partners or with continuous refinancing or, simply, failing to comply with some of its obligations.

However, when there is a genuine current or imminent insolvency situation, it is crucial to carry out a thorough accounting analysis, with the aim of making informed decisions, being aware of the consequences that may arise from them. From the point of view that concerns us here, it is important to bear in mind that the decisions taken in these complicated circumstances can have a significant impact both on the classification of the company's insolvency proceedings and for the director himself.

For this reason, it is important to have the support of a good legal and accounting advice team that allows the company administrators and shareholders to know at all times the state of the company, their rights and obligations with respect to it.

It is worth examining the situations in which liability extends beyond the legal entity itself, directly involving the company directors, as well as the consequences that this type of derivation of liability may entail for them within an insolvency proceeding aimed at achieving the exoneration of unpaid liabilities.

The Fundamental Principle

It is necessary to start from the fundamental principle that every capital company delegates its management to an administrative body, whose main function is to represent the company in all its actions and to make decisions for its efficient functioning, within the limits of its powers, which are established both in the company's own bylaws and in the Capital Companies Act.  hereinafter LSC.

Specifically, the figure of the company's director is regulated in Title VI of Royal Legislative Decree 1/2010, of July 2, 2010, which approves the revised text of the Capital Companies Act.

This set of articles should be known and understood in its entirety, and should be configured as a guide for the activity of administrators. These include the competence of the director, the different ways of organising the body, requirements, prohibitions, appointment and acceptance of the position, registration, remuneration, duration of the position, expiration, cessation, the power of representation of the company and the duties and responsibilities of the directors.

The duties are specifically regulated in articles 225 to 232 LSC, recognising among them the duty to act in good faith, with loyalty and the general duty of care, which also derives from and binds the rest of them.

We must make express mention of the diligence required of them, since after the reform of the LSC, from Law 31/2014, it exceeds that of the "good father of the family", reaching that of "an orderly businessman". The regulation of this duty fulfils a dual function: on the one hand, it is a guide that illustrates and instructs how directors should behave in the performance of their duties and, on the other hand, it provides the basis for examining the liability resulting from the breach of these basic duties.

Therefore, and once again, it is important to highlight, understand and act with full knowledge of the facts, and to have the support of a team that can provide clear and truthful information on the state of society at all times.

Consequences of not filing for insolvency proceedings

Once the duties and obligations are known, it is important to analyse the consequences that arise for the company's administrator if he or she does not request insolvency proceedings.

In the first place, it is necessary to start from the basis established in article 363 LSC, regulating the assessed and imperative causes in which the company must be dissolved:

"The company must be dissolved when the losses reduce the net assets to an amount less than half of the share capital, unless the share capital is increased or reduced to a sufficient extent, and provided that it is not appropriate to apply for a declaration of insolvency."

This directly implies knowing when it is appropriate to request the declaration of insolvency and, for this, we must refer to the revised text of the Insolvency Law, which establishes in its article 2, that the declaration of insolvency will proceed in the event of insolvency of the debtor, which may be current or imminent. At this point, both of these duties lead us to talk about the first consequence that can be derived from this: the rebuttable presumption of guilt in the insolvency proceedings.

"Bankruptcy is presumed guilty, unless proven otherwise, when the debtor or, as the case may be, its legal representatives, administrators or liquidators have failed to comply with the duty to request a declaration of insolvency."

It is not conceivable that this classification of culpability would be limited to the company, since as directors of the company, they can be considered to be persons affected by this classification, which may in any case involve:

* Disqualification from administering the property of others for a period of two to fifteen years, as well as from representing any person for the same period,

* The order to pay the costs of the company's insolvency proceedings, in accordance with article 455.3.2 of the TRLC.

* Coverage of the deficit, with or without solidarity, in whole or in part, to the extent that its conduct has determined the classification of the insolvency proceeding as culpable, bearing in mind the way in which it would have generated or aggravated the insolvency.

Secondly, it is necessary to refer to article 367 LSC to find out the cases in which the directors are jointly and severally liable for the company's debts, provided that within two months of the occurrence of the cause for dissolution or the acceptance of the appointment, they have notified the court of the existence of negotiations with creditors to reach a restructuring plan or have requested the declaration of the company's debts. of the company's insolvency proceedings.

Conclusion

Having examined the cases in which the director may be affected by not applying for the company's insolvency proceedings, it is necessary to highlight the importance of a general, and often presumed, duty of diligence in the actions of the directors, the failure to comply with which entails consequences that go far beyond the liability to the company.affecting first-hand in your personal sphere. (Source: E&J.)