Differences between corporate action, individual liability action and non-contractual civil liability

Table of Contents

1. Introduction.
2. Social responsibility action of the administrators.
3. Adminstrators’ Individual responsibility action.
4. Differentiation between corporate action, individual action and extra-contractual civil liability ex art. 1.902.CC.
5. Conclusion.

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Introduction

We have been analyzing the different responsibilities of the administrators in the exercise of their functions. Responsibilities that, we recall, are of a non-contractual nature. We have defined them one by one in a separate way, and even comparing them briefly. In this article, we will try to make a more accurate and extensive comparison. We will establish their most important points, delimited by doctrine and jurisprudence.

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Can liability action and director’s liability action be joined in the same lawsuit?

Until 2012, the Supreme Court did not rule on the accumulation of two types of shares. The action for liability for debts and the action for liability of administrators.

Social responsibility action of the administrators.

In this respect, we have articles on our website analyzing this responsibility in greater depth. However, for purposes of illustration, taking into account the present comparison, it is appropriate to briefly delimit it again.

In order to exercise this action, a series of requirements must concur. These coincide, for the most part, with those necessary for the individual action.

• An action either active or passive of the administrators, including therefore the omissions and not only actions. Behaviour to be carried out by the directors in the exercise of their duties.
• This active or passive behavior has to be anti-legal. In other words, it must be against the law, bylaws, or due diligence. In this respect, we have a detailed analysis of this diligence and administrative negligence on our website.
• This anti-legal behavior must be attributable to the board of directors. In addition, it must have produced a damage.
• This damage must be direct. That is to say, it has to produce damages in the patrimony of the company. Between the damage and the action or omission there must also be a causal connection.

Therefore, the society itself is legitimated for the exercise of this action. The company is the one that has effectively received a direct damage in its patrimony. However, it is important to highlight its disposition. The society itself can decide in its own bylaws, or even the Board, to waive the exercise of this action.

Adminstrators’ Individual responsibility action.

For the purposes of further analysis and clarification, this document on our site, Necessary requirements to exercise the individual action of responsability against the Directors, effectively discusses the requirements.

With clarifying interest for the present article, however, we have to define it briefly.

This individual action is thus characterized by demanding liability from administrators for damages to partners or third parties. The requirements for its production coincide with those mentioned for social action. However, it is relevant to whom the damage is produced: it must be direct against the assets of a partner or a third party. We will further emphasize this distinction in the next section.

Therefore, the legitimation for the exercise of this action is the partner himself or a third party. Whose assets have been directly damaged by the action of the administrative body. Let us remember, in the exercise of their functions.

Differentiation between corporate action, individual action and extra-contractual civil liability of art. 1.902.CC.

Let’s remember that we are facing responsibilities that have in common their extra-contractual character.

• What is the difference between individual and social action and the extra-contractual civil action included in art. 1.902 CC?

The essential difference lies in the area or sphere in which the harmful activity is carried out. The manager can indeed cause a damage, but do it nevertheless outside the exercise of his functions. That is to say, in his personal sphere. In this case, therefore, this extra-contractual civil liability would be applicable. Let us recall a common point of social and individual action: the damage was produced by the behavior of the administrators in the exercise of their functions.

• Difference between the individual and social action of responsibility of the administrators.

In this respect, the main difference between them is the affected assets:

• The affected assets belong to a partner or a third party: The aforementioned individual action of responsibility of the administrators is appropriate.
• The assets affected are those of the company itself: the social action of responsibility of the administrators is appropriate.

It is essential to distinguish when a damage has occurred against the company and when against the partners or third parties. And here it is essential to pay attention to the “direct” condition of the damage. Jurisprudence has been very clear on this matter: One thing is the damage suffered by partners and creditors as a consequence of the damage experienced by the corporate assets. As well as the losses that partners may experience in this respect. Or the difficulty of collecting from creditors. And another is the direct damage produced against the assets of these partners or creditors.

The fact is that this first damage has a manifestly indirect character against partners or third parties. Not so against the company, which has directly suffered it against its assets, and therefore will exercise the social action. Therefore, the jurisprudence prevents that what we can call reflex damages are claimed by means of individual action. Thus, the condition of direct, as we see, is vital to differentiate which action proceeds in one case or another.

Finally, it is important to note the difference in the scope of availability of one action or another by the company. The social action is immersed in the scope of autonomy of the parties. It is only logical, therefore, that society should be able to decide if it wants to dispense with the use of this action. Something that can be done in the social bylaws themselves, or directly in the Board.

This is not the case with individual action, precisely because it affects third parties. Therefore, the company will be oblivious to the possible exercise of this individual action by third parties.

Conclusion

As we have seen, despite fulfilling a number of very similar requirements, there are several aspects that differentiate these responsibilities. Individual and social actions are differentiated from non-contractual civil actions by the scope of action. Thus, in order to exercise individual or social action, the action of the directors must be in the exercise of their functions. This is not the case with Article 1902.CC, which refers to their personal sphere. Finally, in order to differentiate between individual and social action, it will be necessary to analyze: the damaged patrimony (direct damage), and the availability of these actions by the company.

If this article has been of interest, we also suggest you to read the following article published on our website: When does the prescription period of Directors´ liability elapse?