The Supreme Court overturns the insolvency protection afforded to individual representatives

Marta Sagalá, Associate Director of RocaJunyent’s Restructuring Department, analyses in this article for Cinco Días a structural inconsistency of difficult doctrinal justification which for years has burdened Spanish insolvency law: the natural person acting as representative of a corporate director was exempt from liability in insolvency proceedings, despite the fact that, in ordinary company law, he or she was jointly and severally liable alongside the legal entity represented. This normative asymmetry, never expressly addressed by the legislature, gave rise to significant fragmentation in case law and, even more worryingly from the perspective of creditor protection, encouraged the use of instrumental companies as a means of shielding individuals from the consequences of management that had led to insolvency. The real decision‑maker could thus evade insolvency sanctions behind the mere façade of a legal person, in open contradiction with the principles underpinning both company law and insolvency law.

This anomaly has now been definitively resolved by Supreme Court Judgment 114/2026 of 30 January, which establishes binding legal doctrine through a systematic and teleological interpretation of Articles 455.2.1º of the Consolidated Text of the Insolvency Act and Articles 212 bis.1 and 236.5 of the Spanish Companies Act. The Supreme Court concludes that the natural person representative must be equated with the corporate director in terms of functions, duties and liabilities, also within insolvency proceedings, without any need to resort to the concept of the de facto director in order to justify such extension. The judgment precisely delineates the scope of the imputable consequences — personal disqualification, joint and several liability for the insolvency shortfall, and the exclusion of sanctions lacking a compensatory purpose — yet its legal message is unequivocal: the interposition of a legal entity in the management of a company in financial distress no longer operates as a firewall against the insolvency liability of the real manager who has engaged in unlawful conduct.

Read the full article here.