Companies Act 19,550 · Article 275 — Extinction of directors' liability

When directors' liability is extinguished (Art. 275 LGS)

Article 275 of the General Companies Law governs how directors' liability to the company is extinguished: through approval of their management, an express resignation, or a settlement resolved by the shareholders' meeting. It does not apply if liability arises from a violation of the law, the bylaws, or regulations, nor if at least 5% of the capital objects; and it is ineffective in a compulsory or bankruptcy liquidation.

Source: Act 19,550

What article 275

Article 275 sets out the grounds and limits on the extinction of directors' liability.

Official text · Act 19,550, art. 275

The liability of directors and managers to the company is extinguished by approval of their management or by an express resignation or settlement, resolved by the shareholders' meeting, provided that liability does not arise from a violation of the law, the bylaws, or regulations, or provided that there is no objection from at least five percent (5%) of the share capital.

The extinction is ineffective in the event of a compulsory or bankruptcy liquidation.

Source: Law 19,550, Art. 275 — InfoLEG (updated official text)

Commentary

Approval of management by the shareholders' meeting releases the directors with respect to the company, but with important limits: it does not cover liability for violation of the law, the bylaws, or regulations, and an objection from just 5% of the capital is enough to block the extinction and enable the corporate action (Art. 276).

In addition, the extinction is ineffective if a compulsory liquidation or bankruptcy proceeding follows: in insolvency, approval of management does not protect the directors against creditors. It is a relative defense, not a safe conduct.

Distinctions often confused

Extinction through approval of management is not the same as Limits of Art. 275. Approval releases the director, unless liability arises from violation of the law/bylaws, at least 5% of the capital objects, or a compulsory or bankruptcy liquidation follows.

Practical impact

Approval of management is not an absolute shield: a 5% minority can block the extinction, and insolvency renders it ineffective. It is advisable to document the objection at the meeting in order to preserve the corporate action.

Frequently asked questions

Does approval of management release the directors?

In principle yes, with respect to the company, unless liability arises from violation of the law or the bylaws, at least 5% of the capital objects, or a compulsory or bankruptcy liquidation follows.

How can the minority prevent the directors from being released?

By objecting with at least 5% of the share capital, which blocks the extinction and enables the corporate liability action (Art. 276).

This page is informational and does not constitute legal advice nor replace professional consultation. It quotes the official text of the rule; for its application to a specific case, consult a licensed professional.

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