Dissolution for losses: when directors are personally liable

Where losses reduce a Spanish company's net equity below half of its share capital, the Spanish Companies Act (Ley de Sociedades de Capital, LSC) imposes on its directors a duty to react within two months. Failing to do so is not a minor breach: it makes the director jointly and severally liable, with their own personal assets, for the company's debts arising after the ground for dissolution occurred. It is one of the most common routes to personal liability in Spanish commercial practice and one of the most heavily litigated between creditors and directors.

The ground for dissolution based on losses

Article 363.1.e) LSC lists as a ground for dissolution losses that reduce net equity to less than half of the share capital, unless the capital is increased or reduced to a sufficient extent, and provided that the company is not required to file for insolvency. The concept deserves precision: this is a balance-sheet imbalance, not a lack of liquidity. A company may hold cash and still be caught by the ground for dissolution if its accounting equity has fallen below that threshold; conversely, it may face cash-flow strain without the ground arising at all. The test is a comparison between the net equity shown in the accounts and the registered share capital figure, which is why reading the balance sheet and its asset and liability groupings is the first technical exercise to be carried out.

The duty to call a general meeting within two months

Once the ground exists, article 365 LSC requires the directors to call a general meeting within two months so that it may resolve to dissolve the company. Time runs from the occurrence of the statutory or bylaw ground — as article 367 makes clear in its current wording — and not from the approval of the annual accounts that reveal it; where the director was appointed later, the period runs from the date on which they accepted office. The meeting may avoid dissolution by adopting, provided the item is on the agenda, whichever resolutions are needed to remove the ground under article 365.2: a capital increase or reduction that restores the balance sheet, a shareholder contribution (whether non-refundable or on account of future increases), the conversion of debt into capital, or any other measure of equivalent effect.

If the meeting is not called, is not held, or adopts none of those resolutions, any interested party may apply for judicial dissolution before the commercial court of the company's registered office under article 366 LSC. The directors themselves are obliged to apply for it where the shareholders' resolution was against dissolution or could not be reached, and must do so within two months from the date scheduled for the meeting, where it was never constituted, or from the day of the meeting in the remaining cases.

Joint and several liability under article 367 LSC

This is where the real exposure lies. Article 367 provides that directors who fail to call the general meeting within two months, and those who fail to apply for judicial dissolution within the period indicated, are jointly and severally liable for the company's obligations arising after the ground for dissolution occurred. One point decides most of these disputes and deserves emphasis: liability covers obligations arising after the ground, never those predating it; and where the director was appointed at that meeting or afterwards, only those arising after they accepted the appointment.

The nature of this liability is equally important. It is not a liability for damage. Unlike liability for damages under article 236 LSC — which requires wilful misconduct or negligence — and unlike the individual action under article 241 LSC, article 367 does not require the creditor to prove any loss or any causal link between the director's conduct and the non-payment. It is liability for another party's debt, close to a penalty in its structure, attached to an objective fact: inaction in the face of a ground for dissolution. The director ends up answering with their own assets for whatever the company contracted while they should have been reacting.

Which obligations are presumed to arise later, and who must prove it

The dividing line in time is decisive, which is why the statute reinforces it with a rule of evidence. Article 367.2 LSC provides that, unless proven otherwise, company obligations whose performance is claimed in court by legitimate creditors are presumed to date from after the ground for dissolution occurred, or after the director accepted the appointment. This presumption is not a novelty of the 2022 reform: it already appeared in the original wording of the provision. Its practical effect is the same in either case: the burden of showing that a debt arose before the ground — and therefore falls outside this liability — rests on the defendant director. Hence the importance of being able to date each obligation precisely and to document the exact moment at which the balance-sheet imbalance occurred.

How a director may be released from liability

Law 16/2022 of 5 September, reforming the consolidated text of the Spanish Insolvency Act, added a third paragraph to article 367 that opens a route out. Even where the ground for dissolution has occurred, directors are not liable for subsequent debts if, within those same two months, they notified the court of the existence of negotiations with creditors with a view to a restructuring plan or applied for the company to be declared insolvent. If the plan is not reached, the two-month period resumes once the notice of the start of negotiations ceases to produce effects. Along the same lines, article 365.3 LSC exempts directors from calling the meeting in those situations; following the amendment introduced by the seventeenth final provision of Organic Law 1/2025 of 2 January, in force since 3 April 2025, the meeting must be called within two months from the moment the effects of that notice cease. The practical conclusion is clear: turning to pre-insolvency or insolvency in good time not only brings order to the company's crisis, it also protects the personal assets of those who run it.

A closed parenthesis: the COVID-19 accounting moratorium

During the health crisis, article 13 of Law 3/2020 of 18 September excluded the losses of certain financial years from the test under article 363.1.e), so as to prevent a chain of dissolutions. In its final wording, resulting from Royal Decree-Law 27/2021 and article 65 of Royal Decree-Law 20/2022, the losses of the 2020 and 2021 financial years were disregarded until the close of the financial year beginning in 2024. That suspension is now exhausted: in current ordinary financial years all losses, including those of 2020 and 2021, count normally for these purposes. Criteria designed for that exceptional context should not, therefore, be carried over to the present.

How we help with directors' liability for losses at RCM Legal

Two situations recur. The first is the director who does not notice — or prefers not to notice — that net equity has fallen below half of the share capital, and lets the two months pass; when a creditor sues, they find themselves personally answering for debts they believed were the company's alone. The second is the creditor who is unaware that they may proceed against the director for obligations arising after the ground for dissolution, often a more solvent route than the company itself, and one pursued with the same tools as any recovery of unpaid commercial debt. In both cases, the moment the imbalance arose and the date on which each debt was incurred are the facts that decide the case.

At RCM Legal we advise both the director who must react in time — analysing the balance sheet, calling the meeting and adopting the removal measure, the notice of negotiations or the insolvency filing — and the creditor seeking to claim against those who managed the company. As commercial lawyers in Murcia, if your company is running losses or a debtor has shut down leaving invoices unpaid, tell us about your case and we will assess your position, your deadlines and your options.