Duties of care and loyalty of administrators (LGS art. 59)

Article 59 of the General Companies Law establishes the conduct standard for every administrator: to act with loyalty and with the diligence of a prudent businessperson. A person who breaches those duties is jointly and severally liable without limitation for damage caused by act or omission. It is the benchmark for the liability of managers and directors.

What article 59

Article 59 establishes the administrator's fiduciary duties—loyalty and diligence—and joint and several, unlimited liability for breach. Other provisions refer back to this standard, including article 274 for S.A. directors.

Source: Law 19,550, art. 59 - InfoLEG (updated official text)

Commentary

The duty of loyalty requires placing the company's interest ahead of personal interest: avoiding conflicts, refraining from competing with the company, and not appropriating corporate opportunities. The duty of diligence is measured by a professional standard—the prudent businessperson—more demanding than ordinary private care.

Breach produces joint and several, unlimited liability for resulting damage. Article 59 is the general rule; for directors of an S.A. it is supplemented by article 274, which takes into account the functions assigned to individual directors.

Distinctions often confused

Practical impact

Article 59 is a principal statutory basis for liability claims against managers and directors. Documenting decisions, recording the business rationale, and abstaining in conflict situations are key protective practices.

Frequently asked questions