What does it mean to be a Director of a Spanish company? What are the benefits and risks involved in this type of business management? We look at the implications of being a Director in a Spanish company, as well as the responsibilities of the position in the tax, criminal, civil and commercial fields.
The Administrative Body of any company is the body that is responsible for the management and representation of the company. This body is different from the ownership held by the shareholders or partners, depending on whether we are referring to the owners of a public limited company or a private limited company, respectively.
Pursuant to article 210 of Royal Legislative Decree 1/2010, of 2 July, approving the revised text of the Capital Companies Act, all Administrative Bodies may be composed of:
A Sole Director who will have all the powers of the Administrative Body.
Several joint and several directors (normally 2 to 5) who have the same powers of the administrative body as the sole director and may act individually and jointly and severally on behalf of the company.
Several Joint Administrators (normally 2 to 5) who have the powers of the Administrative Body to act jointly and severally on behalf of the Company.
And the Board of Directors, which is a consultative, executive and collegiate body, made up of the minimum and maximum indicated in the Articles of Association (from 3 to 12 normally) or, failing that, by the General Meeting of Shareholders.
In order to be appointed as a director, it is not necessary to be a partner or shareholder of the company (limited or public limited company, respectively).
At the time of incorporation of the company, an administrative body must be appointed from among the 4 options described above and for the period of time specified in the Articles of Association.
The responsibilities of the directors include, among others, the preparation of the annual accounts at the end of each financial year, giving a true and fair view of the financial position, assets and liabilities and the results of operations.
The Directors are the persons who shall be liable, as the case may be, for any damage they may have caused as a result of their actions, but always limited to the term of their office. Damages shall be understood to be all those that are the result of an unlawful or unlawful act or omission that produces real damage to the Company and a direct relationship of culpability on the part of the aforementioned Director.
This type of offences of CRIMINAL LIABILITY can range from falsification of documentation (the annual accounts is usually the most common where a prison sentence ranging from one year to 3 years or a fine of 6 to 12 months is established); imposition of agreements adopted by a false or "fictitious" majority (where a prison sentence of 6 months to 3 years or a fine of three times the profit obtained is established); obstruction of public control and supervision (which carries a prison sentence of 6 months to 3 years or a fine of 12 to 24 months); fraudulent administration (which carries a prison sentence of 6 months to 4 years or a fine of three times the benefit obtained).
It should be noted that there are other types of criminal offences with varying penalties such as: the one who takes over its assets to the detriment of its creditors; the one who generates or contracts new obligations and debts when the dissolution process already exists; providing false data regarding the accounting status; defrauding the Public Treasury by avoiding the payment of taxes, not withholding amounts that should have been withheld or unduly obtaining refunds or enjoying tax benefits; obtaining a subsidy or aid from public authorities by falsifying the conditions required for its award; accounting offences such as recording figures other than the true ones, concealing or simulating the true situation of the company, etc.
On the other hand, within CIVIL and COMMERCIAL LIABILITY, the Administrator will also be liable for the debts contracted since the serious financial situation arises, i.e. if the company has to be dissolved, the situation should not be further indebted. The liability generated by the breach of any of the aforementioned obligations is considered to be personal, unlimited and joint and several.
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