Differences between social action, individual action and extracontractual liability

Differences between social action, individual action and extracontractual liability

In this article we will try to solve one of the main doubts that exist regarding the social action, the individual action and the civil extracontractual liability in order to try to delimit the most effective ways to claim the breach of obligations related to a commercial company. 

What is a social action and what are its characteristics?

The so-called social action of liability is a mechanism available to the company, the shareholders and the creditors to judicially demand that any damage caused to the corporate assets by a set of conducts be repaired. 

Corporate liability actions are regulated in the Spanish Capital Companies Law, divided according to who they are to be directed against. 

On the one hand, there is a corporate liability action against the founders for the damages that they may cause when incorporating a company due to the different declarations they make. This case has a preventive nature. It tends to be especially relevant in the cases of the accuracy of the content of the Articles of Incorporation and other constitutive documents of a mercantile company, as well as in the responsible use and investment of the funds destined to the incorporation. 

On the other hand, we have the so-called social action of liability for non-monetary contributions, according to which the expert in appraising the real value of the contributions made will be liable in cases of falsehood or inaccuracy of the information provided. 

Additionally, we have the social action of liability against the auditors of the company’s accounts and against the liquidators of the company in the event of insolvency proceedings.

The social action of liability against the directors

We have previously mentioned some of the main assumptions relating to the social action of liability divided depending on the persons to whom it is directed. 

In this order of ideas, we must also mention the so-called social action of liability against the directors, being the most frequent and well known of the different social actions. 

This is based on the breach of obligations by the directors related to the specific functions and the different tasks that must be performed for the good management of the company. 

The social action of liability determines that the directors in law or in fact will be liable before the company, the shareholders and the social creditors for the damages caused by acts or omissions that are contrary to the law or the bylaws, as well as those that are performed in breach of the duties inherent to the position. 

It is important to add that, even if the General Shareholders’ Meeting ratifies or authorizes the action that derives in the breach, this will not exonerate the administrator from any liability he may have. 

The corporate liability action may be brought by the company itself, by the shareholders or even by third parties.

What is an individual action and what are its characteristics? 

Unlike the corporate actions described above, an individual action is one that is recognized to a partner for direct damages caused by an act of the directors themselves. 

This individual action of liability can only be exercised by the shareholder who has suffered the damage in an individualized manner. 

It is important to point out that, to proceed with the exercise of this action, the damage caused must be individualized and cannot be a mere reflection of the damage caused to the assets of the company. 

In practice, the individual liability action is often unfounded, since it consists of seeking to hold the directors personally liable for the acts carried out by them in the name and on behalf of the company. The problem lies in the fact that this action can make a director liable for acts carried out in the interest and for the benefit of others. 

Differences between corporate action, individual action and extracontractual liability

Finally, it is worth addressing the existing debate on social action, individual action and extracontractual liability. 

In this sense, the difference lies in the assets that are affected, i.e. on which assets the damage occurs. 

In those cases in which the affected assets belong to a partner or a third party, the individual action for liability against directors will proceed. On the other hand, in those cases in which the damage is caused to the company’s own assets, the corporate liability action is applicable. 

In order to make the distinction as to where the damage occurs, it is essential to understand that the damage must be direct. In this sense, it is necessary to separate what is a damage suffered by a shareholder that derives from the damage suffered in the patrimony of the partnership from what is a direct damage suffered in the patrimony of the shareholder. 

Bearing in mind the characteristic notes of the corporate action and of the individual action, it must be understood that the extracontractual liability is different to the extent that it affects the personal sphere of the director and is not related to his actions directly in the internal sphere of the company. 

LETSLAW

In Letslaw we have professionals specialized in the legal advice of companies and the relationships that occur between its shareholders and directors.