Dissolve and liquidate a company in 5 steps

The process to dissolve and liquidate a company is a complex operation that has various requirements and steps that must be followed to maintain legal compliance.

The < firm>dissolution of companies implies their extinction, or what is the same: their disappearance from legal traffic.

It is the most recommended solution when you want to close a business and cease its activity permanently. Once the liquidation process is completed, the company’s obligations will also cease.

How is the company dissolution and liquidation procedure carried out?

jointly in the same act
separately, first carrying out the dissolution and opening of liquidation. Once these procedures are completed, the company is liquidated, subsequently cancelling the entries in the Commercial Registry.

If you choose to carry out the two separately, you must remember that the first phase does not imply the company’s extinction nor the disappearance of the bond of partners.

1- Dissolution: cause and registration

The dissolution of a company can occur for various causes considered by the Company’s Bylaws and in Royal Legislative Decree 1/2010, of July 2, of the Capital Companies Law, highlighting:

Agreement of the General Meeting of Partners
Complete cause
- Due to the expiration of the term established by statutes
- For the passage of one year from the adoption of the agreement to reduce capital below the legal minimum
Verification of legal or statutory cause, among others:
- For the cessation of the exercise of the activity of the corporate purpose
- Due to the manifest impossibility of achieving the social purpose
- Due to paralysis of social bodies
- For losses that reduce the net worth to less than half of the share capital
- Reduction of capital below the legal minimum
- For other reasons established in the statutes

The dissolution of the company must be formalized by public deed before a notary and registered in the Commercial Registry corresponding to the domicile of the company and its publication in the Official Gazette of the Commercial Registry.

2- Liquidation of the company

Once the dissolution has been agreed, the liquidation period of the company begins, the main characteristics of which are:

Its legal personality is maintained, but the company’s ordinary activity is suspended
With the opening of the liquidation period, the Administrator of the same ceases his position, and they cease to be the representatives of the company. The liquidators of the company are appointed in the same act, and they assume all the functions of the administrators.
The people in charge of carrying out this liquidation process and representing the company are the liquidators designated in the statutes or appointed by the General Meeting.
The main obligations of the liquidators are, among others, to ensure the integrity of the corporate assets as long as their distribution does not occur. Formulate inventory and Final Balance, carry out the operations necessary for liquidation, receive social credits and pay social debts, keep accounting and safeguard the company’s books and documentation, inform partners and creditors of the liquidation process, etc.
The company that is in this phase must add the expression “in liquidation” to its corporate name.

The purpose of the liquidation period is to distribute the resulting social assets among the partners once the outstanding credits have been collected and the company’s debts have been paid.

The liquidation operations of the company, by that established in its Bylaws and the applicable legislation, will be carried out by the liquidators based on a Balance Sheet and Inventory of the company on the date of dissolution, and will carry out those operations pending and necessary for the liquidation:

collection of credits of the company
payment of debts of the company
disposal/sale of the company’s assets
any other necessary to carry out the liquidation of the company

3- Celebration of general meeting of partners

Approval of the Final Balance, reading of the Liquidation Operations Report and Proposal for the division of corporate assets. Approval of the operation.

Once the liquidation operations are concluded, the General Meeting of partners will be held for the approval of the Final Liquidation Balance Sheet, along with a Complete Report on the liquidation operations, as well as the proposal for the division of the resulting social assets among the partners, based on what the Bylaws determine, or failing that, proportional to their participation in the social capital.

4- Public deed. Registration in the Commercial Registry

Once the dissolution and liquidation processes are completed, the liquidators must grant a < decisive>public deed of the resolutions adopted to terminate the company before a notary.

This will be registered in the Mercantile Registry, and the < substantial>cancellation of the company’s registry entries therein will be recorded.

Once the entire operation has been completed and the company’s entries have been cancelled, the company will lose its legal personality. Therefore, will be extinguished for all its purposes.

5- Taxation of the operation

The taxation of the operation will be carried out by the Property Transfer Tax and Documented Legal Acts in the form of Corporate Operations, which the partners will pay based on the liquidation fee received. for each one (1%).