Showing posts with label Company Law. Show all posts
Showing posts with label Company Law. Show all posts

Tuesday, 12 May 2015

Liability of company directors. Individual action concurring with cause of dissolution (qualified losses) and bankruptcy declared. Dismissed. Judgment (Appeal) of the Court of Barcelona (s. 15th) of April 7, 2015 .

  1. The claim against III,SL “a company with limited liability” and its manager, was brought  for damages allegedly caused by IIISL and is Director, as they did not promote the dissolution and liquidation of the company for undercapitalization (arts. 236, 241, 363. 1 e / and 367 of the Companies Act  (LSC).
  2. The judgment of first instance was decided for the plaintiff
  3. The Director’s appeal was founded on (i) the irrelevance of the First Instance Decision based on the provisions of art. 105 LSRL and 51a of the Bankruptcy Act (LC) and (ii) the non-existence of the conditions that can found an “individual action for damages”
  4. The first plea is based on the incompatibility (in terms of Article 51bis LC) of the action for not promoting dissolution and liquidation, with the bankruptcy situation (IIISL voluntary bankruptcy was declared on November 27 2012 by the Commercial Court (7) at Barcelona. The First Instance Court had been required to suspend the ordinary process, but did not do it. The TS(as already stated by STS of June 20, 2013, acknowledged such incompatibility and rejected the first bases of the appeal  
  5. Art 51bis LC establishes that upon declaration of the “concurso” leading to bankruptcy proceedings initiated before the bankruptcy declaration against the directors of corporations upon allegations that they had breached the duties imposed on them when there is a “cause for dissolution”, shall be suspended.
  6. The “so called individual action” to demand liability from Directors is not affected by bankruptcy, but the action of responsibility for “failing to promote dissolution” is affected.
  7. In terms of “individual action” for damages brought against the appellant, in its application, the plaintiff stated that the administrator urged supplying, whilst he knew of the under capitalization of the defendant company. The Director ought to have promoted timely dissolution and liquidation thus avoiding the disappearance of the debtor company and the non-payment of the debt to the plaintiff. The aim of Art. 241 of the LSC (individual liability action) is to restore the individual assets of the shareholders or third parties who have been directly damaged by an act or omission attributable to the Director. It is an action for damages to which the company's creditors are entitled and which requires a behavior or facts, acts or omissions - of managers lacking due diligence leading to injury. The injured plaintiff must prove a precise and direct causal link between such an act (omission, etc.) and the harmful result. Such direct causation was not evidenced. This leads to the dismissal of individual action for damages brought against the appellant

Thursday, 2 April 2015

Board of Directors. Board, Board Members. Code of corporate governance of Spain. 2015

  1. Large part of the changes in the Good Corporate Governance Code relate to the board of directors and its specialised committees, to improve its efficient functioning and to favour the participation and dedication of its members:

I Meeting of the Board.-  It is recommended that the board meets at least eight times a year. 
II Board Members
  1. Non attendance.- If a director does not attend a meeting, it is recommended that he or she confers representation with precise voting instructions.                               
  2. Gender diversity is encouraged, promoting the objective that in 2020 the number of women directors represents at least 30% of the members of the board of directors.
  3. Independent directors are recommended to reach at least half of the total number of directors (or only a third in companies that do not have a high capitalisation or companies with one or various shareholders who jointly control more that 30% of the share capital).  
  4. Coordinating Director. The functions of the coordinating director ares extended with respect to those regulated by the Companies Act. He or she ought to be charged with keeping contact with investors and shareholders to learn about their opinions and concerns regarding the company's corporate governance.
  5. Conflicts of interests. It is recommended that companies publish on their websites any information on the remunerated activities performed by their directors, whatever their nature.
  6. Remunerations.

a.       Some recommendations are included towards there being a balance between the need to remunerate the directors' talent and dedication and promoting corporate sustainability and profitability at long term. It is recommended that the contract with the executive director includes the possibility that the company may claim reimbursement of the variable components of the remuneration when payment is not in line with performance conditions or when they have been paid in view of data that is later proved to be inaccurate.
b.      In relation to the termination compensation, it is recommended that a quantitative limit is established equal to the total annual remuneration for two years, and also that the compensation is not paid until the company has verified that the director has accomplished the established performance criteria.
III Board Structure. Commissions and Units
  1. Internal risk control and management unit. The Code recommends its creation under the supervision of the audit committee to the correct functioning of the company's risk control and management systems and monitor compliance of the policy defined by the Board.
  2. Nomination and remuneration committee, due to the importance given to the selection of directors and the plurality of technical considerations to be taken into account when establishing their remuneration systems, in high capitalization companies it is recommended that two separate committees be created, one for remunerations and the other for nominations,

Tuesday, 3 February 2015

Branches opened in a Member State

From: Internal Market, Company Law, EU Website
Eleventh Council Directive 89/666/EEC of 21 December 1989 concerning disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State . The directive applies to branches opened in a Member State either by limited liability companies (listed in Directive 2009/101/EC) governed by the law of another Member State or by companies governed by the law of a non-EU country which have a comparable legal form.
Branches of companies from other Member States
  • The compulsory disclosure requirements cover: address and activity; company's place of registration and registration number; name and legal form of the company, and name of the branch (if different from company); appointment, termination of office and particulars of the company representatives; winding-up of the company, appointment and particulars of liquidators; accounting documents; closing of the branch.
  • Items that need to be compulsorily disclosed will be made publicly available through the interconnection system of central, commercial and companies registers established by Directive 2012/17/EU and available by mid-2017. Branches must have a unique identifier to allow identification of at least: Member State of the register; domestic register of origin; branch number.
  • It should also contain, where appropriate, features to avoid identification errors.
  • The Member State of the branch may require additional disclosures, e.g. signature of the company representatives or instruments of constitution.
  • Where disclosure requirements of the company and branch differ, those concerning the branch apply for transactions with the branch. If a company opens several branches in a Member State, it can choose in which branch's register it discloses the accounting documents and the instruments of constitution, and make a reference in the registers of the other branches.
  • The company’s register must make available without delay, through the registers interconnection system, information on any winding-up or insolvency proceedings of the company and on the striking-off from the register, if this has legal consequences in the register Member State. The branch register must be able to receive such information through the registers interconnection system, so that branches can also be struck off the register.
Branches of companies from non-EU countries
  • Compulsory disclosure requirements for branches of companies from outside the EU, having a legal form comparable to that of EU limited liability companies, cover the following additional ítems:
    • the law of the State governing the company;
    • the instruments of constitution, memorandum and articles of association;
    • the company's legal form.
  • Where accounting documents are not drawn up under EU legislation or in a similar way, Member States may require that these be drawn up and disclosed for the branch's activities.

Tuesday, 30 December 2014

Illegal distribution of dividends. Company Law, Bankruptcy Law. Spain

Illegal distribution of dividends. Spain

The dividend distribution agreement is an act of equity disposal in that it recognizes a right in favor of the partners, and  carries a reduction in the assest of the  company. It may be subject to revision if it is adopted two years before the bankruptcy declaration and it lacks justification from the perspective of the interests protected in bankruptcy law. TS decision  no. 428/2014, of 24July.

Dividends of a company subsequently declared bankrupt may constitute an act of disposal of equity harmful to the company:
  • if it was agreed without due justification, thus violating Company Law ...
  • if the  distribution agreements was "irregular"  because it was based entirely or partially in nonexistent net benefits,
  • or because it was agreed without  respecting legal and statutory rules on reserves, or without due account of  the provisions of art. TRLSA 213 (current art. 273 TRLSC).