Duties and obligations of the company administrators

Title VI of the Capital Companies Law regulates matters concerning the administration of a company, and specifically Chapter III of said title establishes the different duties of the administrators who They will be the object of our study, corresponding to articles 225 and following of the Law.

Duties and obligations of company administrators

Administrators are appointed at the General Meeting respecting the majority regime, so that majority shareholders will have the ability to choose the management team in charge of taking decisions Fundamental governance decisions in the company.

The duties and obligations imposed by law are the minimum rules to be respected by those who assume the position of administration, and constitute a system of guarantees for minority partners to the extent that they limit the field of action of the governing body for the general benefit of the company.

We will describe below the obligations contained in the Capital Companies Law, which are common to all types of administrators, regardless of whether they act as sole administrator, on the board of directors, in a joint and several regime or pooled.

The Law makes no distinction in this regard, so we must interpret that these obligations operate under equal conditions for all of them.

General duty of care

Article 225 LSC determines that administrators will have the obligation to carry out their position with timely dedication, making the decisions that are considered most accurate for a correct management of the company, and respecting in any case the obligations imposed by the Law and the bylaws of the company.

The duty of diligence is specified in that the administrator respects the minimum criteria of an “orderly businessman”, words that are explicitly used in art. 225 LSC.

There are three sections that the Law distinguishes regarding the duty of care, and which are summarized as follows:

1. Obligation of administrators to respect the Law and the bylaws.
2. Obligation to ensure correct management and control of the company.
3. Duty to demand the necessary information to be able to make the most appropriate decisions.

Duty of loyalty

This obligation translates into a generic requirement of good faith, so that the administrator is required to always act in the best interest of the company.

A basic example of a breach of this duty are those decisions made for the administrator’s personal interest, and not for the best benefit of the company.

That is why greater control of compliance with this obligation is required in companies with dissenting partners.

Art. 228 of the Capital Companies Law provides a breakdown of certain obligations contained in the duty of loyalty, which we detail below:

1. Not use the powers conferred by the company for purposes other than those for which they were granted.
2. Do not reveal relevant company secrets to which you have had access due to your position as administrator. The Law expressly establishes exceptional cases in which the administrator may reveal these secrets.
3. Not participate in voting on General Meeting resolutions or make management decisions when there is a direct or indirect conflict with their own interests or with the interests of a close relative. You must also refrain from those agreements or decisions that affect your status as administrator.
4. Abstain from submitting your judgment or criteria to the interests and instructions received from third parties.
5. Adopt the appropriate measures to prevent, as far as possible, other private interests from coming together or in conflict with the interests of the company. The Law makes a detailed specification of some of the situations in which a conflict of interest should be considered. Among them, it is worth mentioning that of developing activities outside the company in competition with it, using the name of the company or the assets of the company to obtain a benefit derived from a private operation, receiving remuneration from third parties for the performance of their position , or carry out transactions with the company.

People linked to administrators

The Law seeks to preserve the independence of the administrator vis-à-vis the company and places special emphasis on the possible conflict between the interests of the company and those of the company itself administrator.

And to this end, the duty of administrators to avoid situations of conflict of interest with people related to themselves is extended.

In this sense, article 231 LSC determines that in any case persons related to the administrators must be considered:

1. The administrator’s spouse or people with an equivalent affective relationship (for example, domestic partners, sentimental partners, etc.).
2. The ancestors, descendants and siblings of the administrator and his spouse.
3. The spouses of the ancestors, descendants and siblings of the administrator.

Liability for breach

Article 227 of the Capital Companies Law warns of the liability incurred by anyone who does not respect the duty of loyalty:

“Breach of the duty of loyalty will determine not only the obligation to compensate the damage caused to the company’s assets, but also to return to the company the unjust enrichment obtained by the administrator.”

The amount that the negligent administrator must repay to the company will be equivalent to the damage produced.

Generally this type of claim filed against administrators will require an expert report that quantifies the damage and determines the amount that the administrator must pay.

The existence of a crime could even be understood when it is proven that the administrator diverted funds from the company for his own enrichment or related persons.

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Deberes y obligaciones de los administradores

José Luis Casajuana Ortiz
Partner of J. L. Casajuana and head of the international area< /a>