Corporate Crime: Some Questions Regarding Art. 293 Spanish Criminal Code

Analysis by Dr. Jesús Becerra

The punishable offence provided by art. 293 CP (Spanish Criminal Code), assigns criminal significance to administrator’s restrictions to exercise the corporate rights guaranteed by Commercial Law.

The precept establishes:

About the legal interest

With regard to the legal interest protected by this figure, the courts (as it usually happens) adopt a formal approach in line with the literality of the type of offence. This broadens the traditional concept of legal interest: if what is punished is the mere violation of the administrator’s non-penal duties towards partners, the criminal offence would include conducts that are not at the serious end.

The typical behaviour

The typical behaviour basically consists of hindering the partners’ actions within the company as well as impeding the exercise of their rights. Therefore the company administrator alleges infringement of his duties through “refusal” (for example, of the existence of the right) or “impediment” (“hindrance”, “obstruction”).

It seems logical to require, as a precondition, that the exercise of the eventually denied right, has been clearly requested by means of a requirement, as established in case-law.

Regarding subjective demands, we understand that it would be enough if the offender proves consciousness and voluntariness -“deliberate intention”, “malicious intent or intention” – being aware that the action he performs “denies” and/or “hinders” “without legal cause” the partners’ rights. It should also be noted that, in general, this type of conduct also intends to hide fraudulent or unfair conducts that has caused damage to the company equity.

Case-Law

As far as case-law is concerned, the extent criteria for minimising the application of this crime by the courts, appear to be the order of the day. For example, in judicial decisions in which this type of criminal offence is prosecuted since 2019, the conviction rate is very low. Particularly, in twenty resolutions analyzed, criminality is strongly appreciated in only two convictions. On the contrary, the rate of acquittals is particularly high when deciding on the typical lack of relevance. Something similar happens with non admitted lawsuits in which the commission of an offence is reported.

It is important to mention that most of the alleged misconducts mainly relate to the typical form of denial or hindrance of partners’ right to information. 

Sentences

Hence, sentences including conviction of criminal offence of art. 293 CP (Criminal Code) are essentially two: 

• The sentence of the Provincial High Court  (Audiencia Provincial de Barcelona, Section 6, num. 627/2019 of October 7. Speaker: Del Amo Sánchez), considers an appeal presented by the private prosecutor and states that, indeed, the account of evidence based facts “…results in conduct that is not only obstinate, but in open and stubborn denial of Ms. [… ] political rights. The conduct of the defendant has left her partner’s status just as a mere formal title without content.

The acts subject to prosecution are the following:

The defendant, Mr. X, sole administrator of company O, has never convened her partner Ms. Y to the Ordinary Shareholders’ Meeting, since Ms. Y acquired the status of partner (resulting from succession). For this reason, Ms. Y sent a notarial request to administrator X’s registered office as well as to his private address requiring him to convene the Ordinary Shareholders’ Meeting. The notarial request failed. After that, partner Y formally appealed to the Commercial Registry to appoint auditors to examine and evaluate the  statetement of accounts of the company. Administrator X was reached by auditor B, who was responsible for carrying out the order. And due to the impossibility to audit the accounts because administrator X did not provide the requested information, the auditor reported it to the Commercial Registry. Subsequently, partner Ms. Y urged a procedure of voluntary jurisdiction to convene Ordinary Shareholders’ Meeting, as well as to obtain information about terms and conditions of the sale of assets of the company, the convening of which was unsuccessful.

As can be seen, the account of the facts is particularly exhaustive in terms of compliance with the requirements demanded in legal writing and case-law. It can therefore be stated that the restrictions on the criminal offence definition could only be exceeded by such demanding levels. 

• For its part, the sentence of the Provincial High Court (SAP Barcelona, Section 7, N. 775/2019 of November 29, Speaker: Rodríguez Santamaría), dismisses an appeal and confirms a conviction under Art. 293 CP (Spanish Criminal Code), based on factual circumstances involving compliance with fewer requirements than the previous scenario. In this case, the injured party also sent a burofax (certified letter) to the administrator asking for information and documentation concerning the company as well as on the general meeting that should be held at that time since he had not received that information from the administrator. 

Ultimately, a common element in both cases is the existence of a formal requirement and the offender’s obstructive conduct that clearly violates the right to information of the aggrieved company partners.

It should also be noted that similar criteria can also be found in resolutions coming from Provincial High Courts when considering the criminal relevance of such conducts.

• Thus, for example, Provincial High Court order (AAP Burgos, Section 1, No. 128/2019 of February 15, Speaker: Fresco Rodríguez), an order requesting to dismiss the case is revoked “after carrying out a minimal investigation”. In this case, the administrator has repeatedly refused to provide the injured partner with any information from the company and to provide it with the relevant documentation. The injured party, as in the previous cases, placed multiple requests via burofax and email and requested for all kinds of information from the company (tax payments, invoices, annual accounts, balance sheets, inventories, etc.). In this case, as in the previous cases, the author’s obstructive conduct was persistent.

• In the end, and despite the low number of judicial decisions, a pattern of typical conduct can be deducted according to the inherent restrictions in this type of criminal offence. The criminal relevance is necessarily related to serious obstructive conduct, together with constant and repeated duties of care on the injured party side: in all cases the victims have insisted, or what is the same, their conduct has also been reiterated when claiming their corporate rights.

On the other hand, the restrictive trend in case-law leads to a considerable discrimination in cases that are not of typical relevance. We group these cases along the following lines:

• The administrator provides partial or insufficient information. For example, sentence of the Provincial High Court (SAP Ourense, Section 2, No. 82/2020 of 29 June), in which the administrator gives the minutes of the Shareholders’ General Meeting to the partners, but does not provide  the original shareholders’ registry book nor the minutes book in order to check the authenticity of the photocopies provided.

• There are cases in which the affected part initially shows little interest on the company’s performance and there is no ab initio allegation regarding violation of the right to information or this is requested irregularly. It is assumed that the partner alleging the infringement would be in a position to exercise his rights. For example, sentence of the Provincial High Court (SAP Barcelona, Section 10, No. 170/2019 of March 26. Speaker: Lagares Morillo), in which the complainant never showed any interest in the development of the company until the day she decided to send a burofax to the administrator requiring the information submitted to the Shareholder’s General Meeting for approval. The information included in a huge amount of documents, was sent to her incomplete and also too late. The resolution establishes: “It is logical to conclude that, if the partner allegedly marginalised from the activity of the company cannot specify which documents or what information has not been provided by the administrative body, or which has been provided in an incomplete manner, it is difficult to claim that this right has been denied, prevented or hindered”.
• Finally, criminality is also denied if the complainants refer to a generic violation, without specifying which conduct violates the partners’ rights. Thus, for example, sentence of the Provincial High Court (SAP Barcelona, Section 5, No. 358/2020 of July 7. Speaker: Ramon Fors): “…the charge for a corporate crime is based, according to the indictment and the subsequent conclusions, on a generic charge stating that the defendants have not provided the company’s accounts, which is an insufficient and inadequate factual basis for prosecution. It does not specify when and for which periods the information was not provided…”

Conclusion

In all, the criminal offence included in art. 293 CP (Criminal Code) clearly advances the protection barriers inherent in criminal law. Therefore, since the entry into force of this criminal offence, the efforts of legal theory and case-law have focused in restricting the scope of typicity associated with this precept in order to cover as far as possible punishability gaps which are out of the scope of non-criminal mechanisms. Case-law is devoted to applying criminal penalties for the most burdensome conducts that could be embedded in this type, rejecting conflicts that could be resolved in other jurisdictional courts.

NOTE: This article is a summary of the text published in “The Unbridgeable Barrier for the Criminal Relevance of the Infringement of the Duties of the Director of the Corporations [art. 293 Spanish Criminal Code)”.  https://diariolaley.laleynext.es/

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