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… have debts of €3.5bn and 4 months to renegotiate them with their creditors (mainly Santander and Bankia) or they’ll be the second biggest bankrupcy in Spanish history:
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Clifford good point. I have never understood why the governments doesn’t step in and garnish salaries like that when it’s quite evident that the company is not doing well and they have lots of backtaxes. This is a problem in most countries though.
I can understand protecting normal employes salaries when they go bankrupt etc but not board members.
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Ardun – it’s a well known problem with what in the UK are known as “Limited Liability Companies” (the one’s with Ltd after their names). Limited Liability essentially means that the directors are not personally responsible for their company’s debts. This is good in the sense that it encourages people to start up their own business, safe in the knowledge that if things go wrong they won’t be personally ruined (in the old days they could even end up in a debtors prison). The risk is therefore passed on to the creditors if things go wrong. You’d think that the creditors would therefore be careful of who they lend to. But of course banks don’t need to be careful because it’s not their money that they are lending and, since the whole lending system is vastly interconnected, they can’t be allowed to go bust. It is a system ripe for abuse and needs to be changed.
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@shakeel wrote:
The creditors of a limited liabity Company are either secured on unsecured. The Directors do not escape personal liabilty where they have committed fruad or traded frudently.
Yes – only banks are allowed to trade fraudulently it seems
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@katy wrote:
It is not unusual for small and medium size companies to see Directors having put up their houses as security to the bank, especially in times of expansion. They are liable then.
Yes there are cases where directors have taken on personal risks, and I shouldn’t have given the impression that they are not liable at all, and they don’t have complete “barra libre” to credit like the banks do. But the system is open to abuse.
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I am not aware of the Spanish Company Law. In UK small,medium Company Directors give personal guarantee’s for loans/overdraft facilties. This does not cover trade creditors such as people providing goods & services. It for this reason that the limited companies are suppose to disclose all & sundry information in their annual return and accounts in order that suppliers can evaluate the risk of extending credit.
How accurate & historic this information is depends. Credited reference agencies provide a credit limit upto which it is considered prudent to extend credit. In practise this does not happen !!!!
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http://www.companylawclub.co.uk/topics/limited_liability.shtml
The basis of limited liability is that all debts incurred by a company are the company’s liabilities and not directly the legal liabilities of the shareholders or of the directors. The company is a separate legal person from the shareholders and the directors. The company incurs debts in the course of its business and only the company is liable for those.
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