Criminal Defence for Unfair Administration: Technical Assistance for Investigated Directors and Executives

Unfair administration (administración desleal) is the offence codified in Article 252 of the Spanish Penal Code, as amended by Organic Law 1/2015, which punishes any person who, having powers to administer another's assets — derived from law, authority or a legal transaction — infringes those powers by exceeding their exercise and thereby causes harm to the administered assets. The penalty is six months to three years' imprisonment for the basic offence, rising to six years when the aggravating circumstances of Article 250 CP apply, particularly when the harm exceeds €50,000. We advise directors, board members and executives on their defence in criminal economic investigations, providing the best technical defence of their constitutional rights from investigation through to trial and any subsequent appeals.

What unfair administration is and who can be charged

The Penal Code reform implemented by LO 1/2015 fundamentally reconfigured the economic offences of unfair administration and misappropriation, which in the pre-2015 wording coexisted in Article 295 CP (corporate unfair administration) and Article 252 CP (general misappropriation) in a confused manner, generating contradictory case law.

Following the reform, Article 252 CP is the sole provision regulating unfair administration, both in the corporate context and in any other situation involving the management of another’s assets. The constituent elements of the offence are:

Qualified perpetrator. Only a person with powers to administer another’s assets can commit the offence. In the corporate context, this status is held by de facto and de jure directors, managing directors, chief executives with sufficient authorisation, liquidators and auditors when acting with dispositive powers. Ordinary employees without disposal powers cannot be principal perpetrators, though they may be accessories.

Breach of the duty of loyalty. The offence requires active or omissive conduct constituting an excess in the exercise of administrative powers. Delimiting between a criminally relevant excess and a mere incorrect business decision — which may generate civil liability but not criminal liability — is the core of the controversy in most unfair administration proceedings.

Actual financial harm. The offence requires that the conduct has caused actual harm to the administered assets. The risk of harm alone, or a mere formal breach of the director’s duties, is insufficient: the harmful result must be established by the prosecution. The absence of actual financial harm excludes the offence.

Intent to cause harm (dolo de perjuicio). The subjective element is the Achilles heel of the prosecution in many unfair administration proceedings. The offence is intentional: the director must have acted with knowledge and will to breach their duties and cause harm. Gross negligence or carelessness in management is insufficient to establish Article 252 CP; while it may give rise to civil liability, it does not attract criminal liability.

The separation of misappropriation and unfair administration: practical consequences

LO 1/2015 definitively separated misappropriation (new Art. 253 CP) from unfair administration (new Art. 252 CP). The distinction has practically relevant consequences for the defence.

Misappropriation under Article 253 CP requires an act of appropriation or diversion: the perpetrator takes possession of the assets they administer in order to incorporate them into their own estate or diverts them for the benefit of a third party. The typical result is the reduction of the third party’s assets with a corresponding enrichment of the perpetrator or the third party.

Unfair administration under Article 252 CP does not require appropriation. It is sufficient that the director, in the exercise of their powers, takes decisions that cause harm to the administered assets, even if there is no personal enrichment of the perpetrator. A decision to enter into a ruinous commercial transaction, to release a debt without consideration, to provide disproportionate guarantees or to make a speculative investment without adequate cover may fall within the offence even if the director obtained no personal benefit.

This distinction is fundamental to the defence: in many cases where the prosecution characterises the facts as misappropriation, the defence can argue that, at most, the applicable offence would be unfair administration, with different penal consequences or even additional arguments for excluding intent.

The business judgment rule as a defence argument

The business judgment rule — the rule of discretion in commercial decision-making — is a doctrine of Anglo-Saxon origin that has gained increasing acceptance in Spanish case law as a criterion for delimiting between a legitimate business decision — even if incorrect or unfortunate — and criminally relevant disloyal management.

The application of the business judgment rule in criminal proceedings allows the defence to argue that, although the director’s decision resulted in harm to the company’s assets, it was taken in good faith, on the basis of reasonably available information, within the statutory powers of the office and without a personal conflicting interest. Where these elements are present, an erroneous business decision does not fall within the offence of unfair administration under Article 252 CP, which requires intent to cause harm.

The documentation of board decision-making processes — detailed minutes, prior independent adviser reports, economic and financial due diligence, consultation with auditors — is the primary instrument for establishing the concurrence of the business judgment rule before the examining court (Juzgado de Instrucción) and, if necessary, before the court hearing the case.

Concurrence with fraudulent asset concealment and criminal insolvency

Unfair administration may occur in the context of the company’s financial difficulty, where directors take asset restructuring measures that, although justified from a business continuity perspective, may be interpreted as fraudulent asset stripping to the detriment of creditors.

Article 257 CP punishes fraudulent asset concealment (alzamiento de bienes): the concealment, transfer or encumbrance of assets to frustrate the recovery of debts. Where unfair administration conduct coincides with the concealment of assets from creditors, a concurrence of both offences may arise. The defence must demonstrate that the challenged corporate transactions responded to a legitimate business logic — refinancing, sale of non-core assets, provision of guarantees to lenders — and not to a fraudulent intention.

Articles 259 and following of the Penal Code criminalise criminal insolvency offences properly so called: the wilful or reckless causation of insolvency, fraudulent concealment of assets in the insolvency proceedings and improper acts of disposal during the suspect period preceding the insolvency. Coordination between the criminal defence and insolvency law specialists is essential for building a coherent strategy.

Civil liability and concurrent civil corporate proceedings

Criminal proceedings for unfair administration are typically brought simultaneously with civil director liability actions under Articles 236 and following of the Corporate Enterprises Act (Ley de Sociedades de Capital). Both routes seek compensation for the harm caused, although the standards of proof and legal consequences differ substantially.

A criminal conviction for unfair administration, if it declares the causation of financial harm to be proved, will result in a conviction to pay civil liability derived from the offence in an amount equivalent to the harm caused plus statutory interest. This civil order accessory to the criminal proceedings is independent of — and accumulates with — the civil corporate liability derived from the breach of the director’s duties of diligence and loyalty.

The defence must strategically manage this dual exposure: coordinate with the civil proceedings lawyers to avoid admissions or acknowledgements in civil proceedings that could prejudice the investigated person’s position in the criminal proceedings, and use information obtained in the civil proceedings to build defence arguments in the criminal forum.

Regulatory framework

• Article 252 CP — Basic offence of unfair administration (LO 1/2015). Penalty: six months to three years.
• Article 250 CP — Aggravating circumstances applicable to unfair administration. Aggravation threshold: €50,000.
• Article 253 CP — Misappropriation (separated from unfair administration by LO 1/2015).
• Article 257 CP — Fraudulent asset concealment. Possible concurrence with unfair administration.
• Articles 259–261 bis CP — Criminal insolvency offences. Insolvency context.
• LO 1/2015, of 30 March — Penal Code reform separating misappropriation and unfair administration.
• Articles 236–241 LSC — Civil director liability (Corporate Enterprises Act).
• STS 476/2015, of 13 July — First Supreme Court interpretation of new Article 252 CP following the reform.
• STS 206/2018, of 26 April — Delimitation between unfair administration and mere erroneous business decision.

This service is part of our criminal and corporate compliance practice.