The composition and function of incorporated companies and the fraudulent and deceptive manner in which their assets are contained, becomes central to a contention between founders and creditors when nullity is sought before the national court.
When creditor and claimant (Marleasing SA) discovered that one of the three founders of La Comercial Internacional de Alimentación SA had used the firm to avoid third party recovery of assets, it took action against them in order to expose the company as an illegally created organisation as defined under arts.1261 and 1275 of the Spanish Civil Code.
In response the defendant founder sought the protection of art.11 of Directive 68/151/EEC (also known as the ‘First Directive’), which included an exhaustive list of qualifying conditions for company nullity, yet none of which included the grounds relied upon by the claimant, and so when debated by the Juzgado de Primera Instancia e Instrucción it was agreed that as transposition of the Directive had not been undertaken, the issue remained unsolved without reference to the European Court of Justice under art.177 EC, and so on this occasion the court asked:
1. Were the relevant terms contained in art.11(2) of Directive 68/151/EEC enforceable between individuals despite a failure to adopt them into national Spanish law?
After observing the disparities between existing domestic statute and the meaning of the Directive, the Court explained that no terms of a Directive could be used between individuals under Community law, however a failure to transpose a Directive could result in individual action against the Member State where clarity and specificity of the Directive was shown, on grounds that it remained the Member State’s obligation to align the principles of the Directive against existing statute in order that the Directive’s effect superceded domestic laws.
Going further still, the Court also held that in relation to the protection of nullity under art.11(2)(b) of Directive 68/151/EEC nullity may be provided for where the objects of the company are unlawful or contrary to public policy, or where the number of founding members is less than two, and so in conclusion the Court finally outlined how art.12 nullity entailed dissolution and thereby failed to affect the validity of the company or its dealings despite the presence of unlawful operation or intent, therefore it was down to the discretion of the national courts to determine how best to meet the needs of both the claimant and the defendant, while observing the meaning and effect of Directive 68/151/EEC, before clarifying to the parties that:
“[O]bligation on the part of the national courts to interpret their national law in conformity with a Directive, which has been reaffirmed on several occasions, does not mean that a provision in a Directive has direct effect in any way as between individuals.”