Dissolve and liquidate a limited company: steps, deadlines and costs

These are 3 distinct phases of the same closure and should not be confused. Dissolution is the agreement (or the confirmation of a legal cause) that opens the process: the company stops operating normally, but continues to exist. From that moment it is called "in liquidation" and retains its legal personality (article 371 of the Ley de Sociedades de Capital, the Spanish Capital Companies Act).

Liquidation is the intermediate phase: the liquidators collect what is owed to the company, pay the creditors, sell any necessary assets and calculate what is left to distribute among the partners (the haber social, or corporate assets).

Extinction is the end: once the debts are paid and the cuota de liquidación (liquidation quota) is distributed, the public deed of extinction is executed, registered in the Registro Mercantil (Commercial Registry) and the entries are cancelled. Only then does the company legally disappear. Managora organises the 3 phases and submits each act on time.

The law distinguishes several scenarios. Voluntary dissolution (article 368) is the most frequent: the partners decide it in a general meeting (junta general), without needing to state any reason, with the reinforced majority required by the bylaws or article 199.

Dissolution for legal or statutory cause (article 363) forces dissolution when any of these circumstances occur: cessation of activity for more than 1 year, conclusion of the enterprise that constitutes the corporate purpose, manifest impossibility of achieving the corporate purpose, paralysis of the corporate bodies, losses that leave the net worth below half of the share capital, or reduction of the capital below the legal minimum. In these cases, the general meeting (junta general) confirms the cause by an ordinary majority (article 364, which refers to article 198), unlike voluntary dissolution, which requires the reinforced majority typical of a modification of bylaws.

There is also dissolution by operation of law (article 360), for example when the duration period set in the bylaws expires. It is important to act quickly: if a legal cause occurs, the administrators must convene a general meeting (junta general) within 2 months, and if they do not, they are jointly and severally liable for subsequent corporate debts (article 367).

When liquidation opens, the administrators cease to hold office and, unless the bylaws or the general meeting (junta general) provide otherwise, they automatically become liquidators (article 375). Their number must be odd. They are the ones who represent the company throughout the closure.

In the 3 months following the opening of the liquidation, they must draw up an inventory and a balance sheet of the company (article 383). From then on, they manage the collection of credits, the payment of debts, the sale of assets and the conclusion of pending operations.

When the liquidation ends, they prepare the final balance sheet, the annual report and the project for dividing the assets among the partners, which the general meeting (junta general) must approve (article 390). That agreement can be challenged within 2 months. Managora drafts the minutes, the balance sheet and the distribution project so that everything fits with the subsequent deed.

The golden rule is that creditors are paid first and partners second. Nothing can be distributed to the partners until all debts have been paid or their amount has been deposited (article 391 and following). If the company is in a state of insolvency, meaning it cannot regularly meet its enforceable obligations, ordinary liquidation is not appropriate, but rather concurso de acreedores (bankruptcy proceedings) (article 365.1 of the Ley de Sociedades de Capital and article 2 of the Ley Concursal, the Spanish Insolvency Act). A simple negative net worth does not by itself force bankruptcy if the company continues to meet its payments punctually.

Once the creditors are satisfied, the remainder (the cuota de liquidación, or liquidation quota) is distributed among the partners in proportion to their share in the capital, unless the bylaws state otherwise.

After extinction, assets or debts that were not taken into account may appear (supervening assets or liabilities, articles 398 and 399). In that case, the former partners are liable for the supervening debts up to the limit of what they received as a cuota de liquidación (liquidation quota).

Closing the company in the Registro Mercantil (Commercial Registry) is not the last step: there are still obligations with Hacienda and the Seguridad Social. The allocation of assets to the partners is taxed by the Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados (Property Transfer and Documented Legal Acts Tax) in its Operaciones Societarias (Corporate Operations) modality, at a rate of 1% (form 600, regional). The taxpayers are the partners who receive assets.

Before the AEAT (the Spanish tax agency), the baja censal (census deregistration) (form 036) must be submitted within 1 month from the cancellation of the entries in the Registro Mercantil (Commercial Registry), providing the extinction deed and the registry certification. In addition, the last Impuesto sobre Sociedades (Corporate Tax) (form 200) is pending, which is submitted within the 25 calendar days following the 6 months after the date of the cancellation entry.

In the Seguridad Social, the contribution account must be deregistered (after deregistering the workers, if any) and the deregistration of the administrator or partners in the RETA (the special regime for self-employed workers) must be processed when appropriate. Managora prepares and submits all these deregistrations so that no loose ends remain.

When the company has no pending debts or credits (neither with suppliers nor with the Administration), dissolution and liquidation can be agreed upon at the same time and formalised in a single deed of dissolution, liquidation and extinction. This is known as express or simultaneous dissolution.

For this, the general meeting (junta general) usually meets universally and unanimously, and in the same act the dissolution is agreed, the final balance sheet is approved, a liquidator is appointed, the assets are distributed and the extinction is declared. The result is a single procedure before the Registro Mercantil (Commercial Registry), much faster than the ordinary route.

If there are creditors, assets to sell or disagreement among partners, the express route is not possible and the phased procedure must be followed. Managora first studies the company's situation and tells you which of the 2 routes applies.