Liquidation of commercial companies

The liquidation of a company is a compulsory process following the dissolution of any company. The purpose is none other than to distribute the company's assets among the shareholders and to terminate any existing legal relationships with third parties. For this reason, the Capital Companies Act regulates how this is to be done. Here we would like to explain it in detail.

What causes make the liquidation of a company possible?

To find them, we must turn to article 363 of the aforementioned Capital Companies Act. It specifies that, in order to carry out the liquidation of commercial companies, one or more of the following causes must be present:

• The cessation of the activities of the company's corporate purpose. This is taken for granted after one year of inactivity.
• The corporate bodies are paralysed and it is impossible to guarantee their proper functioning.
• It has become impossible to achieve the company's corporate purpose, so its functions are terminated.
• The losses have caused the net assets to be less than half of the contributed share capital.
• Any other cause provided for in the company's articles of association.

In addition to the existence of a legal cause for liquidation, a series of requirements must also be met. These are set out below.

Legal requirements for the liquidation of commercial companies

First of all, a shareholders' meeting must be convened and the shareholders must agree to the liquidation of the company. At this meeting, they must also appoint a liquidator.

The liquidator of a company is the legal representative of the company during the liquidation process. His or her duties include the following:

• Drawing up the inventory and an opening balance sheet.
• Manage and control the accounts of the company in liquidation.
• Drawing up the closing balance sheet.
• planning the distribution of the company's assets
• Carrying out commercial transactions that have not yet been concluded.
• Proceeding with the payment of partners and creditors.

In the event that the shareholders do not agree on the choice of the liquidator, the authorities have the power to appoint the liquidator from among the shareholders. Once the liquidator has been appointed and has carried out the aforementioned tasks, the liquidator must sign and submit the certificate containing the liquidation agreement between the shareholders to the notary.

Subsequently, this certificate must also be submitted to the Civil Registry Office and the Tax Office. This is a prerequisite for completing form 036. Finally, it will be necessary to pay the amount of corporation tax due for the current year.

The process of winding up a company

The liquidation of a company is the second stage of a three-stage process. All of them lead to the closure of the company. They are as follows.

Dissolution of the company

This is a decision that must be taken by the shareholders' meeting on the basis of the company's articles of association or the Capital Companies Act, as the case may be. It mandatorily entails the immediate suspension of economic activity and entry into the liquidation phase.

Liquidation of the company

During this phase, the ordinary business of the company is also suspended. However, it still retains its legal personality. This will remain in force until the company is finally wound up.

It should be noted that, during this stage, companies are obliged to report that they are being wound up. For this reason, they must add the phrase "company in liquidation" or simply "in liquidation" next to their company name.

Once the debts have been cancelled and the outstanding receivables have been collected, it will be possible to distribute the company's assets among the shareholders. They may also proceed to extinction.

Extinction of the company

For formal purposes, this occurs when the liquidators submit the documentation to the notary, the registry office and the tax office, as well as when they pay the applicable corporation tax. Once all the formalities have been completed, the company's registration is deleted from the civil register.

In short, the liquidation of a company can be due to many reasons, but the process to be carried out is always the same. We hope we have made it clear in this article. However, if you need further information and require personalised advice, please do not hesitate to contact us.