Corporate liability action against directors (Art. 276 LGS)

Article 276 of the General Companies Law governs the corporate liability action against directors: it belongs to the company, subject to a prior resolution of the shareholders' meeting, which results in the removal of the directors concerned. It may also be brought by shareholders who filed the objection under Article 275.

What article 276

Article 276 sets out the corporate liability action: who holds it, the requirement of a shareholders' meeting resolution, and its effects.

Source: Law 19,550, Art. 276 — InfoLEG (updated official text)

Commentary

The corporate action remedies harm caused to the company (distinct from the individual action of a shareholder or third party directly harmed). It is held by the company, but requires a shareholders' meeting resolution, which may be adopted even if not listed on the agenda if it derives from a matter included on it (typically, the review of directors' liability).

The decision to bring the action automatically removes the directors concerned. And if the company does not act, the law empowers the shareholders who objected (Art. 275) to bring it themselves, preventing the majority from 'shielding' the directors. It is a central piece of oversight over management.

Distinctions often confused

Practical impact

The corporate action is the means by which the company recovers from the directors the harm caused by their poor management. The meeting resolution approving it removes the directors; the minority has its own avenue if the company does not act.

Frequently asked questions