The company that owes you is empty: suing its director

The case, in five lines

What is brought

Claim by a company creditor against the director, under the routes provided in articles 367 and 241 of the Companies Act, whose requirements are checked case by case.

Before which court

The Mercantile section of the Tribunal de Instancia (the first-instance court), which hears liability claims brought against the directors of companies.

Deadline

Four years. Article 949 of the Commercial Code provides that the action against managing partners and directors of companies ends after four years, counted from the moment they ceased, for whatever reason, to exercise the administration.

Who can bring it

The company's creditor, with the debt documented and dated. There is no need to be a shareholder or to have taken any part in the company's internal affairs.

Financial risk

The four year limitation defence is the first the defendant will raise, and the argument turns on the date he ceased. If the claim is dismissed, the creditor bears the costs and will have spent a case without recovering the debt.

A company with no assets is not the end of the matter, it is the start of another

A creditor arriving with a judgment against a switched off company finds that enforcement reaches nothing: no balances, no property, no vehicles. The usual reaction is to write the debt off and provision it. That reaction is expensive, because it leaves out of the matter the only person with real assets: whoever managed the company when it stopped paying and when it stopped trading.

Spanish law provides that directors may be liable to company creditors, and it does so through two distinct routes governed by articles 367 and 241 of the Companies Act. These are claims with their own requirements, checked one by one against the text in force and against the specific facts before anything is filed. What does not change is the starting point: the defendant is an individual and answers with his own assets.

The four years of article 949 run from the cessation, not from the invoice

Article 949 of the Commercial Code contains a short and decisive rule: the action against managing partners and directors of companies ends after four years, counted from the moment they ceased, for whatever reason, to exercise the administration. It does not run from the date of the unpaid invoice, nor from its due date, nor from the judgment against the company, but from the cessation of the person who managed it.

The phrase for whatever reason is what makes the calculation hard. A director may have resigned without registering it, may have been removed at a meeting that was never documented, or may simply have stopped managing when the warehouse closed. Establishing that date with evidence is the heart of the case, because it decides whether the action is alive or dead, and it is exactly the ground on which the defendant will build his defence.

Not being on the register does not put someone outside the case

Article 949 speaks of the managing partners and directors of companies, and does not make its rule conditional on the register being up to date. That wording matters when the Commercial Registry says one thing and reality said another: directors whose term had expired but who kept signing, cessations registered years later, or people who ran the company in fact while the formal office stood in someone else's name.

That is why the preliminary work does not stop at a registry search. We reconstruct who signed the orders, who negotiated the payment extensions, who appeared in the emails and who gave instructions to the bank during the period when the debt arose and when the company stopped trading. That material, not the register entry, is what supports the claim when the entry does not reflect what happened.

Dating each invoice and dating the company's shutdown is the preliminary work

This kind of claim is built on two timelines that must be established before a word is written. The first is the debt: when it was contracted, when goods or services were delivered, when each item was invoiced and when it fell due, with the documents to prove it. The second is the company: when it stopped paying, when it stopped trading, when it last filed accounts and when the person managing it ceased.

When the two timelines are laid over each other, the case can be seen at a glance, and the conversation with the director changes tone even before any claim is filed. When they are not built, the opposite happens: the claim rests on a general impression of abandonment, the defendant pleads the four year limitation with whatever cessation date suits him, and the creditor finds out too late that he has nothing to rebut it with.

Winning against the director is still not being paid

A final judgment ordering payment is a title carrying enforceability under article 517.2.1 of the Civil Procedure Act, but it does not collect by itself. An enforcement claim must be filed, and article 548 prevents it being ordered within the twenty days following the day the decision became final. Those twenty days are for preparing the seizure, not for waiting on a call from the debtor.

After that article 518 governs: the enforcement action lapses if the claim is not filed within the five years following finality. And since the person condemned is now an individual, two provisions come into play: article 590, which allows an investigation of his estate at financial institutions, public bodies and registers, and article 607, which sets what part of his salary or self employed income can be attached and what cannot.

How we run the case, step by step

1. 1

   Fix the date of cessation before anything else

   That date decides whether years or months remain. We obtain registry information, review the last filings of accounts and gather the correspondence showing until when the person to be sued was acting as director.

2. 2

   Reconstruct the life of the debt document by document

   Orders, delivery notes, invoices, due dates, part payments and demands are put in order. The date each item arose is central to this kind of claim, and cannot be fixed by estimate or from memory.

3. 3

   Check the requirements of each route against the text in force

   The two liability routes of articles 367 and 241 of the Companies Act have different requirements. We check which fits the proven facts and whether it is preferable to bring them cumulatively or in the alternative.

4. 4

   Demand payment from the director before suing

   A formal demand addressed to the individual, detailing the debt and the dates, forces him to take a position and leaves a record. Many matters close at this point, once the director understands that his own assets are at stake.

5. 5

   Sue and move without pause to enforcement

   Once the claim is filed before the Mercantile section, enforcement against the defendant's personal assets is already being prepared, with the article 590 searches drafted for the very day the judgment becomes final.

The law that applies

• Art. 949 Código de Comercio. It sets the period for the action against managing partners and directors of companies: it ends after four years, counted from the moment they ceased, for whatever reason, to exercise the administration. The starting day is therefore the cessation, and the phrase for whatever reason does not require that cessation to be entered on the register. BOE-A-1885-6627
• Art. 517 LEC. It requires the enforcement action to be founded on a title carrying enforceability and puts a final judgment ordering payment first on the list. That is the judgment obtained against the director, and the one that then allows seizure to be directed at his personal assets. BOE-A-2000-323
• Art. 518 LEC. It provides that an enforcement action founded on a judgment lapses if the corresponding enforcement claim is not filed within the five years following finality. Winning the case against the director opens a second period which likewise runs out by itself. BOE-A-2000-323
• Art. 590 LEC. It allows a creditor unable to identify sufficient assets to request enquiries to financial institutions, public bodies and registers and the individuals or companies he names, explaining why he believes they hold information about the debtor's estate. BOE-A-2000-323
• Art. 607 LEC. It declares unattachable any salary not exceeding the statutory minimum wage and sets the progressive scale applying to the bands above it, with aggregation of payments and a reduction for family responsibilities. Its rules also apply to income from self employed professional and business activity. BOE-A-2000-323

Each article checked against the consolidated text published in the BOE (the Spanish official gazette).

Frequently asked questions