LEGAL RESPONSIBILITY OF COMPANIES AND BUSINESS PERSONS
This month I
would like to address an important and delicate issue: the legal responsibility
of a company or business persons themselves.
First of all,
it is necessary to make a distinction between the sole trader and a company
director.
The first is responsible with all his present and future assets, the
latter’s responsibility is limited to his contribution -if partner of a limited
responsibility company, which is the type of 99% of the companies in Spain- for
the responsibility of a company director is different from the first one
abovementioned since he must “look after the company” as “a good parent must
take care of his child”, having the duty to be diligent, otherwise he can be
responsible personally and, therefore, jeopardise his own assets as if he were
a sole trader.
For several
years now, the responsibility of a director is different, no longer is it generic
and abstract, but objective since the director is directly responsible in some
specific cases, such as, not summoning a General Meeting of shareholders when
the company is in situation of insolvency or to be winded up, not submitting
the annual accounts, not requesting a creditors’ meeting, not winding up
inactive companies, etc.
All these possible situations make the role of
director a very risky one –we already know that the best way to neutralize
risks is by taking out an insurance policy.
The responsibility of a director
may be exercised by creditors and shareholders, in fact, the National Insurance
and Inland Revenue authorities are
already initiating this type of file.
It is true
that sole traders normally set up companies in order to protect their own and
family assets, even sole proprietor businesses, which is still a very good
option.
Nonetheless, I must insist on advising directors of whatever kind of
company to comply duly with their duties and obligations, receive a salary for
their work if possible and take out a special insurance.
Both the sole
trader and director must carry out their activity anyway. If they run their
business duly and are properly advised, then none of them will have a
responsibility problem.
Being either
a sole trader or a director is a profession that creates wealth and, therefore,
it should be more valued and legally protected.
Legislators have been working
in that direction lately. The economy seems to be recovering and it means it is
the right time for new projects and prospects.
We all are
aware of how hard it is to run a business of our own, so let us not allow ignorance
and negligence to destroy our dreams.
