According to Article 373 of the Code of Commerce, shareholder liability is limited to the amount of the respective contribution. Article 148 of Law 222/1995 (which amends much of the Code of Commerce) provides an exception to this principle, so that a parent company or controlling shareholder is entirely liable when found to have caused an entity's bankruptcy. Further, Article 207 states that the partners of a company are liable when found to have deceived creditors if the assets of a liquidation are insufficient to cover the credits owed.
Now the Constitutional Court has ruled that the controlling shareholder of a liquidated company is 'temporarily' liable for that company's mandatory social security and pension fund contributions (Sentence SU-1023 of September 26 2001).
The order to assume 'temporarily' pension and social security liability is problematic and creates the following issues:
- the possibility for creditors under restructuring proceedings to obtain credit outside the proceedings to avoid bankruptcy individually (eg, filing an action for a writ of mandamus);
- the lack of acknowledgement of due process in determining that the parent company must assume the obligations of the affiliated entity even though the presumption of liability grounded in Law 222 of 1995 has not been duly proven in accordance with the proceeding instituted before the Superintendency of Corporations; and
- uncertainty about shareholders' limited liability by imposing upon the controlling shareholder a responsibility in excess of its contribution.
In the case in question, the court based its presumption of subsidiary liability of the parent/ controlling entity upon the needs of the pensionholders.
The ruling makes no reference to its effect where a declaration of non-liability is eventually issued in favour of the entity under liquidation and the affiliate company has already made the requested payments.
For further information on this topic please contact Rodrigo Lozano at Posse, Herrera & Ruiz by telephone (+57 1 312 3124) or by fax (+57 1 3130259) or by email ([email protected]).