No right to compensation

The general meeting of the company of which you are a partner has approved the dismissal of the administrator, after which he claims from the company the payment of compensation for terminating his position. However, most partners oppose the payment arguing that there has been mismanagement. Does he have the right to claim it?

Well, as a general rule, the dismissal of the administrator does not entitle him to automatic compensation, since both the Capital Companies Act (LSC) and the courts require that it be expressly provided for in the bylaws.

Therefore, the content of the bylaws will allow you to know whether the administrator is entitled to claim compensation from the company or not. See what scenarios you may encounter:

• Unpaid position. If they provide that the position is unpaid (or if they do not say anything, in which case the law provides that it is unpaid), the administrator cannot claim any compensation. However, the courts admit an exception: a compensation agreed outside the bylaws – in a contract, for example – will be valid if the content of such agreement is known and consented to by all partners.

• Paid position. If the bylaws expressly indicate that the position is paid and also establish the right to receive compensation upon termination, the administrator will have the right to demand it.

• Paid without compensation. If they establish a paid position but do not foresee compensation upon termination, the same applies as when the position is unpaid: compensation will only be possible – even if not provided for in the bylaws – if it has been recognized in an agreement between the administrator and the company, known and consented to by all partners.

In the event that compensation is provided for in the terms indicated in the previous points, the company cannot deny it based on mere dissatisfaction with the administrator's management, except if there is evidence of a breach of the duties inherent to the position (such as loyalty or diligence).

 

If the dismissed administrator demands compensation, our professionals will verify if he is entitled to receive it.