The liability of the natural person representing the company acting as a director

The directors of a Company may be either individuals or legal entities. In the latter case, a natural person representative must be appointed. The natural person representing the administrator legal person will permanently exercise the functions of the position of administrator. It is a common case when a holding company is the administrator of its controlled companies.

Appointment of a natural person representative

The competence to appoint the representative natural person is held by the legal person appointed as Administrator. The natural person appointed to the position must meet the legal requirements established for administrators. The appointment of several natural persons as representatives of a legal entity is not valid. Even if there are joint or severally administrators in the administrating company.

The registration of their appointment must take place at the same time as the registration of the appointment of the administrating legal entity. The inscription requires the previous acceptance of the position, both of the administrating company and of the representative natural person.

The imputation of liability to the natural person representative as a de facto director.

The provision of the liability of the natural person representative of the legal person administrator in the LSC is relatively recent. The law expressly contemplates the joint and several liability of the natural person representative and the legal person Director.

Is it possible to apply the condition of de facto Director to the natural person representative for liability purposes? A de facto director is considered to be a natural person representative who exceeds the scope of his representation. That is to say, a person who manages the company with total independence, without being subject to the control and instructions of the managing company. The Supreme Court establishes that the mere condition of natural person representative is insufficient to grant him the condition of de facto administrator. This affirmation is based on the explicit provision of the position of natural person representative in the LSC. It must be accredited that the individual representative is the one who administers the company in order to be considered de facto director for liability purposes. With the regulation of the liability of the representative it is not necessary to resort to the figure of de facto administrator. And if it is resorted to, it must be proved that the requirements to consider that we are in front of a de facto administrator are met.

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Is a Company Director responsible for the debts generated when he is not in charge?

What happens in cases where the director is appointed after the debt has been incurred? What debts is a director responsible for? Who is protected by the rule holding the director responsible for social debts?

Is the natural person representing the company director also subject to the directors’ liability regime?

The appointed natural person is subject to the same duties as the administrators. He/she will be jointly and severally liable with the administrating legal entity. The natural person representing the legal entity is equal to the position of the Administrator. The natural person representative will be liable for the breach of the duties and obligations to which the administrators are subject. In other words, the figure of the natural person representative is assimilated to that of the Administrator. The natural person representative and the legal person administrator will be jointly and severally liable, and actions may be brought against one or both of them.

Will the individual representative also be liable for the corporate debts?

As we have been saying, the individual will be liable for the breach of the duties inherent to the position of Administrator. The individual will be liable for the breach of the general duties contemplated in the Capital Companies Law (LSC). He/she will be liable for the corporate debts if he/she does not call a General Meeting to resolve the dissolution of the company or to file for insolvency proceedings. The LSC does not distinguish between the fulfillment of the duties by the legal entity director and its representative. Therefore, it is applicable to all the cases of liability of administrators included in the LSC.

Is the natural person liable in bankruptcy?

The extension of the bankruptcy liability to the natural person representative is not clear. The former Insolvency Law did not contain an express reference to the natural person representative in the qualification of the insolvency proceedings. Nor does the new regulation on bankruptcy expressly contemplate this case. The bankruptcy liability is limited to the administrators, liquidators, de facto or de jure, and general managers of the bankrupt company.

Numerous rulings have established that, in these cases, the liability falls directly on the legal entity administrator. Although it is true that the status of de facto administrator can be attributed to the representative natural person. The liability of the individual representative in the corporate sphere does not extend to bankruptcy liability.

On the contrary, we find Doctrine that disagrees with the above. This thesis emphasizes that bankruptcy liability is a corporate liability. The natural person representative is subject to the fulfillment of the duties of Administrator. And therefore it is coherent that his liability is extended to the insolvency proceedings.

If this article has been of interest, we also suggest you to read the following article published on our website: Insolvency liability of the natural and legal person.