"Express bankruptcy" and liability of directors in Spain

2 min.
The current financial climate brings a surge of bankruptcy proceedings in Spain. According to national the register known as the “Colegio de Registradores”, there was an increase of 86.5% in the first quarter of 2021 compared to the same period in the previous year. While the moratorium is currently still in force for necessary contests, it should end on December 31st of this year. However, the trend could still continue in 2022.

Concurso expres: the express bankruptcy explained

Part of the surge in bankruptcies, include the “concurso expres”, also known as “express bankruptcy”. With these proceedings, a judge declares a company insolvent and concludes if there are sufficient assets to cover the expenses of the procedure. If there are insufficient funds, this leads to the extinction of the said company. This holds for commercial purposes since for procedural purposes the company continues to have the capacity to act as a party. That is, it can be sued as long as it has not liquidated all its rights and pending obligations.

In any case and in regard to this article, it is convenient to underline another differentiating element with respect to what we could call a standard bankruptcy. In the qualification piece (“pieza de calificación”), the judge decides whether or not the bankruptcy is "guilty". This means that the administrators of the bankrupt company could be sentenced to cover the deficits of the contest in whole or part with their personal assets if the bankrupt company is found guilty.

Declaration of liability

It would therefore be reasonable to think that the declaration of an “express bankruptcy” would prevent the declaration of liability of directors. Especially considering that article 470 of the Bankruptcy Law (Real Decreto Legistlativo 1/2020) includes this figure for those cases, the judge considers that the classification of the bankruptcy is guilty and is not foreseeable.

However, article 136.1.2 states that:
"From the declaration of insolvency and until the effective date of the agreement or, if the agreement had not been approved or the approved one had not been complied with until the conclusion of the procedure" [ …] “… The commercial judges will not admit to processing the lawsuits that are presented in which actions are exercised to claim social obligations against the administrators of the bankrupt capital companies that have breached the legal duties in case of concurrence of cause dissolution… ”.

An interpretation "a sensu contrario" of this provision would indicate that, once the insolvency proceedings have been concluded, other actions could be initiated that might be appropriate to claim liability from administrators.

Objective and subjective arguments

A reverse interpretation of the said provision would point in the direction that once the bankruptcy proceedings have been concluded, plaintiffs would be free to start as many actions that might be convenient to claim the directors’ liability based on “objective” reasons. For example, those enlisted in article 363 of the Corporations Act (“Ley de Sociedades de Capital”).

Subjective reasons are covered in article 241 LSC, which regulates individual liability action. Under this article, nothing is provided by the bankruptcy rule. From my interpretation, they can be filed outside the bankruptcy procedure, whether it is concluded or not.

Therefore, the judicial declaration of bankruptcy and simultaneous conclusion or "express bankruptcy" would not prevent creditors of the bankrupt (and extinct) company to initiate actions against the directors in claiming the declaration and corresponding sentence for joint and several liabilities of these with respect to the debts of the company. They will still have the option to sue these directors before the civil courts for that reason.

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