Director liability in Spanish companies is one of the most litigated areas of corporate law, with Arts. 236 to 241 of the Companies Act (Ley de Sociedades de Capital, LSC) establishing a broad civil liability framework that can expose directors to personal asset risk. Combined with Art. 367 LSC — which imposes liability for company debts in dissolution scenarios — and the criminal provisions of the Penal Code, the exposure profile for Spanish directors demands careful and proactive legal management.
Duty of Care and Liability for Breach (Arts. 236-238 LSC)
Art. 225 LSC sets the conduct standard: directors must perform their duties with the diligence of an orderly businessperson. This is an objective, functional standard — subjective good faith is insufficient. Directors must seek adequate information and follow an appropriate decision-making process.
Art. 236 LSC establishes liability for acts contrary to law or articles of association and for breach of inherent directorial duties. Liability extends to both de jure directors — formally appointed and registered in the Commercial Registry — and de facto directors, meaning those who exercise directorial functions without formal appointment or whose appointment is defective.
The derivative action (Art. 238 LSC) requires proof of three cumulative elements: breach of duty, damage to company assets and causal link. The limitation period is four years (Art. 241 bis LSC), running from when the action could have been exercised — generally from when the damage was or should have been known by the company.
Individual Liability Action (Art. 241 LSC)
The individual liability action protects shareholders and third parties — not the company — against direct losses caused by directors’ acts. It arises most frequently where a supplier or creditor contracts with the company and the director knew of insolvency, where fraudulent misrepresentations induce a transaction, or where acts directly harm the claimant’s credit or reputation.
The Spanish Supreme Court has progressively tightened admissibility, requiring that the damage be direct and immediate to the claimant’s own assets — not a derivative loss through harm to the company — and that a specific act by the director be identifiable, not merely a pattern of poor management.
Liability for Company Debts: Art. 367 LSC
Art. 367 LSC has the most practical impact in corporate distress situations. It makes directors jointly and severally liable for obligations incurred after a mandatory dissolution ground arises, where the director failed to convene a general meeting within two months to resolve dissolution or, as the case may be, to file for insolvency.
The most common mandatory dissolution grounds are: losses reducing net equity below half of share capital (Art. 363.1.e LSC); reduction of capital below the legal minimum (Art. 363.1.f LSC); paralysis of corporate bodies for more than six months (Art. 363.1.b LSC); and manifest impossibility of achieving the corporate purpose (Art. 363.1.a LSC).
Art. 367 LSC liability is quasi-objective: it does not require fraud or gross negligence, only failure to comply with the procedural deadline. The Supreme Court has consistently held that a director cannot escape liability by showing shareholders were informally aware of the situation if no formal meeting was convened.
The Business Judgment Rule (Art. 226 LSC)
Art. 226 LSC codifies the business judgment rule, providing safe-harbour protection where the director acted in good faith, had no personal interest in the matter, had adequate information and followed an appropriate decision-making process. Where all four conditions are met, courts may not second-guess the substantive decision or impose liability for the outcome, however harmful.
Recent Supreme Court case law — STS 412/2022, STS 198/2023 — has clarified the rule’s scope: “adequate information” requires reasonableness in the information-gathering process, not certainty; an “appropriate procedure” includes seeking external advice where the complexity of the transaction warrants it. The rule never applies where there is an undisclosed conflict of interest or a clear legal or statutory breach.
Culpable Insolvency and Insolvency Liability
Where insolvency proceedings are classified as culpable — because directors caused or aggravated the insolvency through fraud or gross negligence — affected directors may be ordered to cover the insolvency deficit, disqualified from managing third-party assets for up to fifteen years and stripped of their creditor rights in the proceedings.
The Consolidated Insolvency Law (TRLC, RDLeg 1/2020) overhauled the classification regime. Art. 443 TRLC contains an irrebuttable presumption of culpability where the debtor failed to file for insolvency within two months of knowing — or having been in a position to know — the state of insolvency. This presumption is iuris et de iure and admits no rebuttal.
The Insolvency Reform Act 16/2022 expanded second-chance mechanisms for natural persons including directors, but did not remove the consequences of culpable insolvency where directorial conduct was the cause of the insolvency.
D&O Insurance: Coverage and Limits
D&O insurance has become an essential element of corporate governance. Standard coverage includes third-party claims for negligence in the exercise of office, legal defence costs and, in some products, non-wilful administrative fines. Fraudulent or wilful conduct, personal enrichment and criminal sanctions are invariably excluded.
In the Spanish market, D&O policies for SMEs carry limits of 1 to 3 million euros with annual premiums ranging from 2,000 to 15,000 euros depending on turnover and sector. Listed groups or multinationals require bespoke structures with separate Side A (individual directors), Side B (company reimbursement) and Side C (entity cover) tranches.
Key Recent Case Law
Several recent Supreme Court rulings have consolidated or refined the liability regime:
- STS 412/2022: confirms that Art. 367 LSC operates from the moment the dissolution ground arises objectively, regardless of whether the director was aware, provided they could have been aware with due diligence.
- STS 198/2023: tightens the individual liability action, rejecting claims for “rebounding” losses suffered indirectly through harm to the company.
- STS 567/2024: applies the business judgment rule to a decision not to renew a credit line, acquitting the director despite resulting harm to the company.
Practical Recommendations for Directors
Given this liability landscape, directors should: document board resolutions and information available prior to each material decision; monitor net equity quarterly; review D&O coverage annually; implement a compliance programme demonstrating a compliance culture; formally disclose and abstain on conflicts of interest; and obtain specialist legal advice — with a written record — on complex or high-risk transactions.
The growing role of independent directors in medium and large-company boards adds an additional layer of protection to the decision-making process when properly implemented and provided with adequate access to information.
