Criminal liability of company directors, managers and proxies

Many professionals pursue the goal of, at some point in their careers, becoming a director, manager or trustee of the company they work for. They may also pursue a business idea, realise it and hold such a position.

However, all these people must be careful with their actions and bear in mind that Spanish law provides for the criminal liability of company directors, managers and proxies. But what exactly does it say?

What is the criminal liability of company directors?

When we talk about the criminal liability of a company representative, director or manager, what we are referring to is the possibility under the Criminal Code to prosecute and punish them for offences committed in the exercise of their functions. Contrary to what many people think, these figures can not only be convicted on behalf of the company they represent, but also on an individual level.

We are talking, for example, about a director who diverts part of the profits of the business to his or her personal accounts without the consent of the other members of the board of directors. Or a proxy who carries out an illegal transaction on his own account and at his own risk on behalf of the business. The glossary is very broad, ranging from embezzlement to corruption, from labour rights violations to environmental crimes.

However, not all actions that entail criminal liability of a manager are direct acts. In this respect, the Criminal Code also provides for participation in criminal activities committed by others (e.g. diverting funds to an illegal company) or negligence in supervision. Let us not forget that all these professionals have a number of obligations that they must fulfil.

What are the consequences of the criminal liability of directors, managers and authorised representatives?

It all depends on the seriousness of the offence they have committed. In this sense, the lowest penalties involve disqualifications and professional restrictions that prevent them from holding a similar position for a certain period of time. In some cases, for the rest of their working life.

In a second degree, we would be talking about financial penalties in the form of fines, which are usually quite substantial. However, if the offence is sufficiently serious, the director, manager or proxy may be imprisoned for several years.

These sanctions are not always exclusive, but complement each other in most cases. In other words, such a professional may face a prison sentence, a financial fine and disqualification for a specific period of time. Moreover, he or she may be obliged to pay damages to those affected by his or her criminal actions.

All these sanctions are in addition to those that the company he works for may receive. In this regard, the most serious cases may result in the loss of business licences or even the dissolution of the business.

Why is the criminal liability of company directors, proxies and managers necessary?

These professionals, due to their position of leadership within the business, make decisions of great importance on a daily basis. Not only for the company and for themselves, but also for all those around them. It is therefore not surprising that the Criminal Code provides for a series of specific sanctions for them.

It is true that, like any other citizen, directors, officers and managers are obliged to act with integrity and respect for the law. However, the nature of the decisions referred to above requires special care.

For this reason, it is often advisable to implement internal control systems and promote ethical corporate cultures. The aim is to ensure that they carry out their duties with the utmost rigour and that they ensure that their dependants do likewise. It should not be forgotten that criminal actions by subordinates can also lead to criminal liability for their superiors.

Undoubtedly, the best way to avoid the criminal liability of this type of professionals is to have a legal team that provides legal advice at all times. Not only to represent them in legal proceedings when the time comes, but also to prevent them from occurring. As they say, prevention is always better than cure. In our law firms in Madrid, we have lawyers who specialise in the defence of directors and administrators, whether in criminal or labour law.