The disregard of legal personality is an important institute of business and civil law that allows the liability of partners or administrators of a company for debts or illicit acts committed by the legal entity, when there is an abuse of legal personality or diversion of purpose. This concept is fundamental to ensure justice in commercial relationships and to prevent the creation of companies from being used improperly to defraud creditors or circumvent the law.
Legal personality is one of the fundamental principles of business law, recognizing the company as an entity distinct from its partners or administrators. This means that, as a rule, the obligations and responsibilities of the company are separate from those of its owners or managers, providing protection against personal liability for those involved in the business. However, this separation can be disregarded in specific situations.
There are two main grounds for the disregard of legal personality, according to Article 50 of the Civil Code:
Abuse of legal personality: This occurs when partners or administrators use the legal entity improperly to commit fraud, tax evasion, withholding of labor rights, or other illicit acts. In these cases, the justice system may allow liability to fall on the individuals involved, ignoring the separation between legal and physical persons.
Diversion of purpose: The disregard of legal personality can also be applied when the company is used solely to benefit the partners or administrators to the detriment of third parties, such as creditors or employees. If the company is used to unfairly harm third parties, the justice system can determine that the responsibility falls on those in charge of managing the company.
It is important to highlight that the disregard of legal personality is not an automatic measure but rather a judicial decision that must be based on evidence demonstrating the abuse of legal personality or diversion of purpose. Additionally, the liability of partners or administrators may be limited to the value of the debts or damages caused, respecting the principle of proportionality.