Background
Development of criminal offence
New criminal offence


Background

In October 2012 the Council of Ministers drafted a preliminary bill which would introduce a number of amendments to the Criminal Code. Among these, the bill is intended to introduce a new criminal offence of unlawful administration.

At present, the bill is being analysed by official bodies such as the Public Prosecutor's Council, the General Council of the Judiciary Body and the Council of State.

Development of criminal offence

Before the Criminal Code 1995 entered into force, the criminal offence of unlawful administration sat within the framework of misappropriation. In order to ensure that misconduct which was more in keeping with unlawful administration than misappropriation could be included in the criminal offence of misappropriation, the courts interpreted this criminal offence extensively.

The criminal offence of unlawful administration was created by the Criminal Code 1995 and is established in Article 295, under the section dedicated to corporate criminal offences. Misappropriation, which is set out in Article 252 of the code alongside other criminal offences regarding fraud, is included in a different chapter of the code.

According to the code, the criminal offence of misappropriation occurs when an individual unlawfully appropriates assets that he or she is obliged to return to their rightful owner by virtue of a previous agreement. The criminal offence of unlawful administration occurs when the appointed or de facto administrator or a shareholder unlawfully makes use of company assets and causes harm to the company or its shareholders.

The task of distinguishing between these two criminal offences is quite complicated. Both doctrine and case law have tried to solve this problem through a number of different theories, although to date there is no unanimous case law on the final interpretation of each criminal offence.

Intersecting circles theory
According to this theory, the relationship between the criminal offences of misappropriation and unlawful administration is similar to that of intersecting circles. Although it is accepted that both criminal offences involve specific misconduct, there are certain occasions when misconduct can be categorised as either of the two offences. The Supreme Court has considered that these cases should be settled in accordance with Article 8.4 of the Criminal Code which states that the most serious criminal provision should be applied (ie, misappropriation).

Competency theory
The Supreme Court's May 11 2005 judgment imposed a new interpretation of both criminal offences. According to the judgment:

  • the criminal offence of unlawful administration punishes the abuse of power within the authority granted (ie, abuse within the sphere of the administrator's competence); and
  • the criminal offence of misappropriation punishes administrators who go beyond the functions attributed to them (ie, abuse outside the scope of the administrator's competence).

Although this theory has been broadly applied by the Supreme Court, it has not been accepted unanimously by Supreme Court judges or Spanish doctrine.

New criminal offence

The bill focuses on creating a new independent criminal offence that encompasses misconduct taking place both within and outside the scope of the administrator's competence. With this in mind, the legislature proposed that Article 295 of the Criminal Code be repealed and Article 252 of the code be redrafted, thereby placing this article with a new Section 1bis of Chapter VI of Title XIII of Book II, under the name "Unlawful administration".

According to the bill:

  • the new text for Article 252 will regulate the general criminal offence of unlawful administration; and
  • the new text for Article 253 will regulate and penalise the criminal offence of misappropriation.

Article 252
The bill provides that the new criminal offence of unlawful administration involves the following elements:

  • It must be committed only by the administrator of another person's assets.
  • The misconduct must involve:
    • exceeding the powers of disposal granted – that is, exceeding that which is permitted by law, ordered by the competent authority or derived from a legal act; or
    • carrying out unlawful acts of management within the powers granted by the aforementioned titles, as well as breaching a strong relationship based on trust.
  • The misconduct must cause damage to a person's estate. Damage will be considered to have been caused if:
    • the estate decreases in value;
    • the act of unlawful management results in the estate not increasing in value as it should have done; or
    • a situation is created in which the value of the estate could be completely depleted or there is a high risk of financial loss.

Thus, the new Article 252 punishes unlawful administration misconduct committed by administrators in charge of managing another person's assets when:

  • they exceed the duties or powers that they have been granted; or
  • they breach the duty to safeguard assets, thereby causing damage.

Mitigating circumstance
Article 252.3 of the Criminal Code foresees a mitigating circumstance when the damage caused is of minimal value considering the financial situation of the victim.

For further information on this topic please contact Adriana de Buerba or Juan Pedro Cortés Labadía at PEREZ-LLORCA by telephone (+34 91 436 04 20), fax (+34 91 436 04 30) or email (adebuerba@perezllorca.com orIjcortes@perezllorca.com).