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Nov 24, 2023

The Supreme Court resolves the debate on the statute of limitations for corporate debt liability

The Civil Division of the Supreme Court has recently issued a highly significant judgment in corporate matters, that puts an end to the much-debated principle that the different Provincial Courts have been upholding, regarding the statute of limitations for the liability of administrators for corporate debts.

While some Courts defended the application of article ‘241 bis’ of ‘Ley de Sociedades de Capital’, which means that after four years from the day the claim could have been initiated, the action/claim would fall beyond the statute of limitation, others favoured adhering to article 949 of the ‘Código de Comercio’. Although article 949 also extends over a four-year period, this starts from the moment the administrators “cease, for any reason, to exercise the administration”.

Finally, the Supreme Court has put an end to the debate. Rather than opting for the adoption of either article 241 bis or article 949, it has instead favoured a more general rule, to ensure certainty. According to the High Court, the relationship between the company and its responsible administrator is inseparable. Therefore, the statute of limitations for the action under Article 367 of the’ Ley de Sociedades de Capital’, is the same as that for the warrantor responsible for the payment. This ultimately means that the action against the administrator will have the same statute of limitations as the guaranteed obligation- corporate debt- depending on its nature- contractual obligations, non-contractual obligations, etc.

An example of the implications of the Supreme Court ruling, can be seen from the judgment of a case in which a company has incurred a debt due to the failure of payment for a commercial sale. In this case, the statute of limitations applicable would be that of personal obligations (Article 1964 of the Civil Code)."

To summarise the ruling from the Supreme Court:

  • A director who has ceased, for any reason, to hold office, will continue to be liable as a responsible warrantor, for the non-payment of a credit, until the statue of limitations for that credit against the company, has elapsed.
  • If no explicitly stated period exists, the applicable period will be the 5 years, as specified in Article 1964 of the Civil Code.
  • That director will be subject to the same interruptive effects of the statute of limitations, as would be applicable to the company (Article 1973 and 1974 of the Civil Code).

Finally, it should be noted that the start of the statute of limitation for the action against the director, will also be the same as that of the action against the debtor company.

Further information

For any questions raised in this blog, please contact Cristina Camarero or Marina Blaya.

The full judgment can be found here.

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