If I have signing rights on a company, am I held liable for its debts?

It is quite common to give limited signing powers (apoderado con poderes generales) to trusted employees of a company. This allows them to represent the company in the execution of their duties; for example, signing contracts with customers, human resource management or running bank accounts.

But, does the extension of these powers to employees make them liable for company debts?

In many cases, the company director (administrador) of a Spanish incorporated company (whether this be a SL or SA) may be held personally liable for the debts incurred by the company under their control. And the Spanish courts have ruled that this liability extends to both real company directors as well as people executing that function in all but name (administradores de hecho). These two cases have both been ruled upon by the Spanish Supreme Court:

  • A company director executes full control over the company but extends limited signing rights to employees; employees must report to their superiors before executing these rights. In this case, the supreme court ruled that the apoderados cannot be considered to be company directors as they have no real control over the management of the company, and so are not to be held responsible if the company fails (Supreme Court ruling 04/12/12).
  • The situation changes when it can be proven that the apoderados have control over management decisions. In a ruling, the Supreme Court magistrates ruled that the official company director of a failed company was a mere employee, and that the real decisions were being taken by a person «in the shadows» who had general and unlimited signing powers over the company. This person was held to be responsible as if they were the company director, and personally held liable for the debts of his company (Supreme Court ruling 14/04/09). This ruling did not exonerate the registered company director from their responsabilities.

Under the ley concursal (art. 164), if a company enters into insolvency, apoderados can be held responsible if they have been negligent in their duties and have contributed towards the failure of the business.

To sum up, if you have been granted powers over a company, you should ensure that a clear management trail exists between your actions and the decisions taken by the company directors. This will protect you in the case of company failure, or indeed, if your actions negatively affect your employer. If the courts rule that your decisions were taken without the input of senior management then you may be considered to be a reponsible person of management.

Maria Luisa

María Luisa Cervantes is a chartered accountant who graduated from the University of Granada in 2002. Founder of Cervantes Alarcón Consulting, she is an experienced accountant and financial advisor who is a member of the Almería guild of economists. With more than 15 years of experience in business administration and international trade, she is also a subject matter expert in the UK - Spanish bilateral agreements which cover the rights of expats to live, work and retire in Spain.