ANDORRA Law and Practice Contributed by: Miguel Cases, Marc Ambrós and Marta Felipó, Cases & Lacambra
• the absence of fraud from an Andorran legal stand - point. 6.5 Co-Ordination in Cross-Border Cases In cross-border cases, Andorran courts are willing to co-operate and co-ordinate with foreign courts in insolvency proceedings. Nonetheless, the provisions set by EU Regulation 2015/848 of the European Par - liament and of the Council of 20 May 2015 on insol - vency proceedings are not applicable. 6.6 Foreign Creditors In line with the principle of equality of treatment of creditors, foreign creditors are not dealt with in a dif - ferent way in proceedings in Andorra. 7. Duties and Liability of Directors and Officers 7.1 Duties of Directors Directors must exercise their duties with the dili - gence of an orderly businessman and the loyalty of a good representative. The duty of diligence obliges the director to dedicate time, effort and knowledge and, in particular, to be aware of the progress of the company, to participate actively in its administration and to investigate any irregularities in the manage - ment of the company. The duty of loyalty requires the director to act with the honesty that can be expected of a representative who administers other people’s resources and, in particular, to refrain from compet - ing with the company, from taking advantage of its business opportunities and from using the company’s assets for private purposes. In a scenario of dissolution of the company, provided that its financial situation does not require the com - pany to file for bankruptcy, the administrators must call for a general meeting to adopt a dissolution agree - ment or, where appropriate, the relevant measures to avoid dissolution, within two months from the moment they became aware of the existence of the cause of dissolution or in which they could not have been una - ware of it. To effectively comply with their duties, in a financially distressed company scenario, directors have the obli -
gation to request the initiation of an insolvency pro - cedure to either redress the situation or liquidate the
company, after a bankruptcy procedure. 7.2 Personal Liability of Directors
Directors, whether de facto or de jure or apparent or hidden, can be declared personally bankrupt, in the following scenarios: • falsification of the accounts, changing or conceal - ing numbers or recognition of non-existing debts; • carrying out a personal commercial activity, either through an intermediary or under the cover of a legal entity that conceals its actions; • using the company’s assets for personal purposes; • obtaining, by fraud, a judicial settlement, which resulted in its annulment; or • committing acts in bad faith or inexcusable reck - lessness or seriously infringing the rules or cus - toms of trade. The following acts of bad faith, inexcusable reckless - ness or serious breaches of the rules and customs of trade are presumed: • the absence of accounting in line with the customs of the profession; • purchases made with the aim of reselling at a lower price, with the intention of delaying the confirma - tion of the bankruptcy; • excessive personal or family expenses; • the investment of large amounts on risky opera - tions; or • the abusive maintenance of a loss-making opera - tion, which cannot lead the business to a situation other than bankruptcy. 7.3 Duties and Personal Liability of Officers All officers that have participated in the carrying out of the harmful act or omission will be jointly and severally liable. Administrators who, for reasons not attributable to them, are unaware of the existence of the harmful act or omission are exempt from liability. Administra - tors who have done everything possible to avoid or reduce the damage are not liable.
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