Company directors’ liability in Spain: when directors answer with their own assets
Many business owners in Albacete and Villarrobledo set up a limited company (SL) believing their personal assets will be safe. That is generally true, but there are situations in which the director is personally liable for the company’s debts. Knowing them in time can save your home or savings.
The general rule
The company answers for its debts with its own assets, and shareholders only risk what they contributed. Directors, however, have legal duties: diligence, loyalty and compliance with the obligations imposed by the Spanish Companies Act. If they fail in these duties, they may be liable.
Liability for not dissolving the company
This is the most common basis for claims. If losses reduce net equity below half the share capital, the company has grounds for dissolution. Within two months, the director must:
- Call a general meeting to resolve on dissolution or on measures to remove the cause (capital increase, contributions), or
- File for insolvency if the company is insolvent.
If they do not, they are jointly and severally liable with the company for debts incurred after the grounds for dissolution arose. Suppliers, banks and employees are well aware of this route.
Individual action
Any shareholder or third party can sue a director if an unlawful or negligent act or omission has caused them direct harm. For example, contracting with a supplier knowing they will not be paid, or stripping the company of assets.
Corporate action
This is brought by the company itself (or by minority shareholders and creditors in certain cases) against a director who has harmed the company: conflict-of-interest transactions, unjustified expenses, decisions contrary to law or the articles of association.
Culpable insolvency
If the company becomes insolvent and the insolvency is classified as culpable (for example, because of serious accounting irregularities, late filing or concealment of assets), directors may be disqualified and ordered to cover all or part of the shortfall.
Tax and Social Security debts
The tax authority and Social Security can pass liability to the director in certain cases, such as ceasing trading without winding up the company and leaving debts unpaid.
Time limits
Liability actions against directors generally expire four years after they could first have been brought.
How to protect yourself
- Review the accounts regularly and act as soon as significant losses appear.
- Record decisions in minutes.
- Consider options such as restructuring or insolvency in good time.
- Take out directors’ and officers’ (D&O) liability insurance.
How we help
We advise directors on meeting their duties and defending claims, and suppliers and shareholders on claiming against those in breach. We work with SMEs in Albacete, Villarrobledo, La Roda, Tomelloso, Hellín, Almansa and the rest of Castilla-La Mancha, including foreign-owned companies, in English.
Frequently asked questions
Am I liable for all my SL’s debts?
No. As a rule you are only liable for debts arising after the grounds for dissolution if you did not act in time, or for damage caused by negligent acts.
Does leaving the company dormant protect me?
No. Closing down in practice without winding up is one of the situations that generates most claims against directors.
Is a de facto director also liable?
Yes. Whoever actually runs the company, even if not listed in the Companies Register, can be liable in the same way as the formal director.
This article is for information only and does not replace professional advice on your specific case. It refers to Spanish law.
