Company Director Liability in Spain

Overview of Director Liability in Spain

Being a director of a Spanish company — whether an executive, non-executive, or de facto director — carries significant personal legal responsibilities. Spanish law imposes a multi-layered liability framework that can expose directors to civil claims, tax assessments, and criminal prosecution. For foreign nationals who serve as directors of Spanish subsidiaries, this exposure is real and frequently underestimated.

Civil Liability: The Ley de Sociedades de Capital

The Ley de Sociedades de Capital (LSC) establishes two primary civil liability actions:

Individual or Social Action (Acción Social de Responsabilidad)

This action is brought by the company (or by shareholders acting on behalf of the company if the company refuses) against a director who has caused damage to the company through acts:

• Contrary to law
• Contrary to the articles of association
• In breach of the director’s duties of diligence or loyalty

The company can pursue the director personally for the full amount of the loss. Shareholders holding at least 5% of share capital can bring this action in the company’s name if the board refuses to act (e.g., where the board members are the alleged wrongdoers).

Third-Party Individual Action (Acción Individual de Responsabilidad)

Third parties (creditors, employees, suppliers, clients) can bring a direct action against directors who have caused them harm through acts contrary to law, the articles, or director duties. This action does not require a prior claim against the company — it goes directly to the director.

Director Liability in Insolvency

One of the highest-risk areas for directors is the conduct of the company leading up to and during an insolvency (concurso de acreedores). Key liability triggers:

Failure to Request Insolvency (Tardanza en Instar el Concurso)

Directors are legally required to file for insolvency within two months of knowing (or having cause to know) that the company is insolvent (unable to pay its debts as they fall due). Late filing — particularly if the delay results in increased losses for creditors — is a breach that the insolvency court can use to qualify the insolvency as culpable (concurso culpable).

Culpable Insolvency (Concurso Culpable)

Where the insolvency administration or the court determines that the insolvency was caused or aggravated by serious fraud or gross negligence by directors, the insolvency can be declared “culpable.” Consequences:

• Directors may be disqualified from managing companies for up to 15 years
• Directors may be required to personally cover all or part of the creditors’ unsatisfied claims (liability for the insolvency deficit)

This is the most severe civil liability exposure for directors and can result in personal liability for tens of millions of euros in large insolvencies.

Capital Loss Obligation (Pérdida de Capital que Obliga a Disolver)

If a Spanish company’s net equity falls below half of its share capital, directors are obligated to either restore the equity balance or call a general meeting to dissolve the company within two months. If directors fail to act and the company continues trading and incurs further debt, directors can be held jointly and severally liable (responsabilidad solidaria) for company debts arising after the obligation to act arose.

Tax Liability (Responsabilidad Tributaria)

Spanish tax law (Ley General Tributaria, Articles 42–43) creates two categories of tax liability for directors:

Joint and Several Tax Liability (Responsabilidad Solidaria)

Directors and other persons who actively collaborate in the commission of tax offences can be held jointly and severally liable with the company for the full tax debt. This requires proof of active involvement in fraud.

Subsidiary Tax Liability (Responsabilidad Subsidiaria)

Directors are subsidiarily liable (i.e., the AEAT can pursue them after exhausting the company) for corporate tax debts when:

• They have ceased performing their duties before the tax debt was paid (and failed to take measures to ensure payment)
• The company’s insolvency was caused by their conduct

The AEAT is increasingly pursuing directors personally for unpaid corporate tax, IVA, and Social Security contributions of insolvent companies.

Criminal Liability

Spanish criminal law applies to directors directly and — since the 2010 and 2015 reforms — to the legal entities themselves. Criminal exposure for directors includes:

• Tax fraud (delito fiscal): Intentional evasion of taxes above EUR 120,000 in a single tax period. Punishable by 1–5 years imprisonment and fines.
• Social Security fraud: Failing to pay Social Security contributions above EUR 50,000.
• Fraudulent insolvency (insolvencia punible): Deliberately concealing or misappropriating assets to defraud creditors.
• Corporate offences: Including misappropriation (apropiación indebida), accounting falsification (falsedad contable), and market manipulation.
• Money laundering: Directors of companies used as vehicles for money laundering face severe personal criminal exposure.

The introduction of Article 31bis of the Criminal Code created criminal liability for legal entities for offences committed by their directors or employees, but also provides a full defence if the company had an effective compliance programme. This creates strong incentives for proper corporate governance.

De Facto Directors (Administradores de Hecho)

Spanish law extends director liability to de facto directors — individuals who exercise management functions without being formally appointed. This is particularly relevant for:

• Parent company executives who give binding instructions to Spanish subsidiary directors
• Shadow directors operating through a formal figurehead
• Sole shareholders who manage the company directly while a nominee holds the director title

If a parent company executive regularly instructs the Spanish subsidiary’s management and those instructions are consistently followed, they risk de facto director liability.

D&O Insurance (Seguro de Responsabilidad Civil de Administradores)

Directors’ and Officers’ (D&O) insurance covers the personal liability of directors and officers for claims arising from their management decisions. In Spain:

• D&O policies are standard for listed companies and increasingly common for private companies and foreign-owned subsidiaries
• The policy typically covers defence costs (lawyers, experts) and any settlements or judgments up to the policy limit
• Exclusions typically include intentional fraud, criminal acts, and claims by the insured company against its own directors for disloyalty

D&O insurance does not eliminate director liability but ensures that legitimate management decisions made in good faith are covered.

Frequently Asked Questions

Can a director who simply signed documents without understanding them be liable? Yes. Ignorance is not a defence. Directors have a duty to inform themselves before acting. A director who blindly signs documents presented by management without exercising independent judgment risks liability for the consequences. The business judgment rule protects informed decisions made in good faith — it does not protect directors who simply rubber-stamp decisions.

Is a non-executive director (consejero dominical) at lower risk than an executive director? Non-executive directors face lower operational liability risk, but they share the same duty of oversight as executive directors. They remain fully liable for failing to exercise adequate oversight of matters within the board’s responsibility — particularly fraud, regulatory compliance, and financial reporting.

What happens to a director’s liability when they resign? Resignation does not eliminate liability for actions taken during the director’s tenure. However, resigning before a problematic act occurs, and doing so in a way that triggers the company to address the issue, can limit prospective liability. AEAT subsidiary tax liability requires the director to have been in post when the tax obligation arose.

Can a director in Spain be imprisoned for a company’s failure? Not for insolvency alone. But if the insolvency is accompanied by fraud (concealing assets, falsifying accounts) or intentional tax evasion above thresholds, criminal charges and imprisonment are possible.

How can a director protect themselves? Key protective measures: maintain records of informed decision-making, ensure the company maintains proper compliance systems, act promptly when financial difficulties arise, seek independent legal advice before making decisions with significant liability implications, obtain D&O insurance, and comply with disclosure and conflict-of-interest rules.

How BMC Can Help

We advise directors and boards on their legal obligations under Spanish law, assist in designing governance and compliance frameworks that minimise personal liability exposure, and represent directors in civil, tax, and insolvency proceedings where their personal liability is at stake.