Directors’ Liability in Algeria

Directors in Algeria may face civil liability risks for breach of law, violation of the company’s articles of association and mismanagement. The main sources of such liability are corporate law, employment legislation, environmental laws, tax laws and bankruptcy law.

Corporate law regulates the rights and obligations of directors towards the company and its shareholders. Directors must act within their authority as outlined in the company’s articles of association. If they exceed that authority or breach their duties, they may be held personally liable to recompense the company financially.

Employment legislation regulates the rights and obligations of directors towards the employees of the company. Directors must comply with the labor laws and social security regulations of Algeria. If they fail to do so, they may be held personally liable for any damages caused to the employees or the social security authorities.

Depending on the nature and severity of the violation, directors may face civil, administrative or criminal sanctions, including fines, imprisonment or disqualification.

Directors in Algeria may face civil liability actions from different parties. The company itself can sue directors for breach of law, violation of the company’s articles of association and mismanagement. Shareholders can also sue directors for any damage caused to their interests by the directors’ misconduct. Third parties, such as creditors, employees or customers, can sue directors for any harm caused by their actions or omissions that are separable from their capacity as members of the board.

For instance, lenders can claim against a director’s assets and property if the director has provided a personal guarantee for company debts. Shareholders can sue directors for breach of fiduciary duty, such as acting in bad faith, self-dealing or negligence. Employees can sue directors for wrongful dismissal, discrimination or harassment. Customers can sue directors for breach of contract, misrepresentation or defective products. Creditors can sue directors for fraudulent trading, wrongful trading or misfeasance.

Directors may face criminal sanctions for various offences related to the operation of the company and its day-to-day management and activities. Under corporate law, directors may be criminally liable for fraud, abuse of corporate assets, false accounting, bankruptcy or insolvency offences. In accordance with the Algerian employment legislation, directors may be criminally liable for breach of labor laws, social security regulations, health and safety rules or collective bargaining agreements. Criminal sanctions for directors may equally apply for violations of environmental laws, the breach of tax laws, evasion of taxes or duties or falsification of tax documents. Criminal sanctions may include fines, imprisonment or disqualification.

Criminal proceedings against directors in Algeria may be initiated by different parties. The public prosecutor can initiate criminal proceedings against directors for any offence that falls within his or her jurisdiction. He can act on his or her own initiative or upon a complaint from a victim or a third party. The company itself can – through its legal representative or its liquidator, as the case may be – initiate criminal proceedings against directors for offences that affect its interests, such as fraud, abuse of corporate assets or false accounting. Shareholders can also initiate criminal proceedings against directors for offences that affect their interests, such as breach of fiduciary duty, negligence or mismanagement. In such a configuration, shareholders can only act in the company’s name and claim for the company’s loss, not their own.

Statutes of limitations for civil cases in Algeria vary depending on the type of claim and the parties involved. Civil actions are generally subject to a limitation period of three years from the date when the claimant became aware or should have become aware of the damage and its author. However, there are some exceptions to this general rule:

• actions for personal injury or wrongful death are subject to a limitation period of ten years from the date of injury or death;
• actions for breach of contract are subject to a limitation period of five years from the date of breach or termination;
• actions for professional liability are subject to a limitation period of two years from the date when the claimant became aware or should have become aware of the damage and its author, but not more than ten years from the date when the professional service was performed;
• actions for defamation are subject to a limitation period of three months from the date when the defamatory statement was published or broadcasted.

The limitation periods may be interrupted by certain events, such as filing a lawsuit, sending a formal notice, acknowledging a debt or making a payment.

In turn, in criminal cases, the statute of limitations depends on the type of crime.

Directors and officers liability insurance (D&O) covers current, future and former directors and non-executive directors, affiliates and officers of a company. Risk scenarios include prospectus liability, pension fund liability, and employment practices liability. The D&O insurance protects directors and officers or their company or organization if they are sued (most policies exclude fraud and felonies). D&O insurance can provide three types of coverage: (1) for personal liability of directors and officers; (2) for reimbursement of the company for payments to directors and officers; (3) for direct liability of the company.

Directors of investing or holding companies are generally not considered de facto or shadow directors of joint ventures or subsidiaries unless their actions go beyond what can reasonably be considered appropriate for their position as a director of the investing or holding company.