How to liquidate a company in Spain

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Not all companies find their success on the Spanish market and are put in the position to close their offices here for good or to move to other countries. There are several ways in which a company can be shut down in Spain. These ways, or better said procedures, are covered by the Commercial Code and are known as company liquidation, dissolution or termination.

As a definition, the company liquidation procedure implies terminating of all relations with third parties and dividing the business’ assets among the shareholders with the purpose of terminating the company.

Causes for company liquidation in Spain

A company cannot simply close down for any reason. This is where the Commercial Code intervenes and establishes the conditions under which a Spanish company can be dissolved. These conditions are:

  • the company has failed to meet its objectives and is in the impossibility of paying its debts;
  • the company has incurred such losses that they diminished its share capital to less than half of the initial value;
  • a limited liability company’s share capital was reduced to more than half of the 3,000 euros minimum amount prescribed by the law.

There is also the possibility for a company to be registered for a certain period of time and after the end of this timeframe, the company will be liquidated.

Types of company liquidation procedures in Spain

There are two types of company liquidation processes in Spain: the voluntary and the enforced one.

The first procedure implies the shareholders of the company to reach a common ground and agree on the liquidation of the company, while the second one implies the creditors or the company directors to file a petition with a Spanish court as a consequence of the company being unable to pay its debts.

Voluntary company liquidation

The first step to voluntarily close down a company is for the shareholders to convene an extraordinary general meeting where a resolution for company liquidation must be submitted to vote. This resolution must also pass the vote. Following that, a liquidator must be appointed. That person is usually one of the shareholders or directors of the company.

The liquidator will have the duty to settle the debts with the creditors and then, if any amount remains, divide it between the shareholders.

Once the liquidation of the debts and assets is completed, the liquidator must prepare a liquidation balance sheet and a list of the shareholders, a liquidation deed with a public notary and file it with the Trade Register for de-registration of the company.

Within 30 days from the liquidation, the company must pay the stamp duty which will amount to 1% of the total amount remained after debts to the creditors were paid.

Compulsory liquidation in Spain

Compulsory liquidation only applies when a Spanish company faces bankruptcy. In this case, the directors or the creditors will file a petition for insolvency with a court of law. In this case, the directors and the creditors can reach an agreement in order to settle the debts of the company, following which the company is liquidated.

If no agreement is reached, the court will appoint a liquidator to handle the process and pay off the debts of the company followed by the winding up of the company.

Closing down a company is always a difficult decision to make and an even more difficult one to complete, which is why the options should be weighed before making this decision.