Company liquidation and closure: how to close a Spanish company

Who we help

• Business owners who are retiring with no successor or buyer and want to close their company.
• Shareholders who no longer want to continue together, including those who each hold 50% and cannot agree.
• Directors of dormant companies that have stopped trading but are still registered.
• Companies with significant losses, whose net assets have fallen below half of the share capital.
• Companies with debts that are considering closure and need to know what happens to them.

What it is and when it makes sense

Lawfully closing a company requires three stages:

1. Dissolution. The company is dissolved on a legal or statutory ground, by operation of law (for example, when the term fixed in its articles of association expires, article 360) or by resolution of the general meeting (article 368). It is registered at the Commercial Register, which sends the entry automatically and at no additional cost to the Official Commercial Register Gazette (BORME) for publication (article 369).
2. Liquidation. Dissolution opens the liquidation period (article 371). The company keeps its legal personality, but must add “en liquidación” (in liquidation) to its name. The directors cease to hold office and liquidators take over: unless the articles say otherwise or the general meeting decides differently, the former directors become liquidators (articles 374 to 376). Their task is to collect debts owed to the company, sell its assets and pay its debts.
3. Removal from the register. The liquidators submit to the general meeting a final balance sheet and a proposal for sharing out what remains (article 390). They cannot pay the liquidation share to the shareholders without first having paid the creditors or deposited the amount (article 391). A public deed of extinction is then signed (article 395), registered at the Commercial Register, and all the company’s entries are cancelled (article 396).

The grounds for dissolution are in article 363 of the Spanish Companies Act (Ley de Sociedades de Capital). They include: the cessation of the company’s activity, which is deemed to have occurred after more than a year of inactivity; the manifest impossibility of achieving the corporate purpose; deadlock of the company’s bodies; and losses that leave net assets below half of the share capital, unless the capital is increased or reduced by enough.

When it makes sense

• When the activity has ceased and there is no intention to restart it: more than a year of inactivity is a ground for dissolution (article 363.1(a)).
• When the owner retires and there is no successor or buyer.
• When the shareholders cannot continue together and the company’s bodies are deadlocked.
• When losses have reduced net assets below half of the share capital and the cause is not going to be removed.

When it does not

• If there is a buyer. Selling the shares or the business may be worth more than liquidating it. We treat it as a buying or selling a business matter.
• If the ground for dissolution can be removed, for example by a capital increase or reduction, the general meeting may resolve that instead of dissolving (article 365). Even a dissolved company can be reactivated as long as payment of the liquidation share has not begun and the ground has disappeared (article 370).
• If the company cannot pay its debts. Closing does not extinguish them: what is then required is to consider insolvency proceedings (article 363.1(e)), and the opening of the liquidation phase in those proceedings leads to dissolution by operation of law (article 361).

That is why, before proposing closure, we check whether there is a simpler and less costly solution; if there is, we will tell you.

When it makes sense

• The activity has ceased and the company only generates obligations.
• You are retiring and are not going to transfer the business.
• The shareholders have gone their separate ways and none of them wants to continue with the company.
• The company is a vehicle that has served its purpose, for example after the sale of its only business.
• The directors want to regularise a dormant company before incurring liability.

What the engagement can include

• Analysis of the company’s situation: ground for dissolution, assets, debts, contracts and employees.
• Dissolution resolution: notice and minutes of the general meeting, and appointment of liquidators.
• Registration of the dissolution at the Commercial Register.
• Liquidation operations: inventory, balance sheet, sale of assets, payment or deposit for creditors and calculation of each shareholder’s share.
• Final balance sheet and proposal for distribution, and the deed of extinction with its registration.
• Coordination with your tax and employment advisers for deregistrations and outstanding obligations.

What the scope depends on

• The ground for dissolution and whether the shareholders agree.
• The assets: whether there is property or other assets to sell or allocate.
• The debts, disputes and contracts that must be dealt with.
• Whether there are employees to be looked after.
• The statutory periods, which cannot be shortened, and the Commercial Register’s own processing times, which do not depend on us.

Once we have studied the documents, we send you a quote tailored to your case.

How we work

1. Initial contact. You tell us about your situation and send us the documents.
2. Review of the documents and proposals. We review the company’s situation, its assets, debts and contracts, and set out the simplest way to close it.
3. Quote and letter of engagement. We send you the quote and the letter of engagement in writing.
4. Implementation and follow-up. We see the matter through to the end and coordinate with your tax adviser or accountants (gestoría), the notaries and the registries: the Commercial Register and the Land Registry.

Who handles your matter

The closure is handled directly by Sara González Domínguez, a practising lawyer (abogada) registered with the Málaga Bar Association (no. 8502) and an insolvency practitioner, whose practice focuses on Spanish company and commercial law, always backed by the rest of the firm’s team.

If the company has debts it cannot pay, we work on the closure together with our insolvency proceedings service.

Illustrative example: two brothers, each holding 50% of an SL in the transport sector in Pizarra, decide to stop trading. The company still has a lorry and a debt to a supplier. The general meeting resolves to dissolve and appoints liquidators, the lorry is sold, the supplier is paid and the rest is shared between the shareholders according to their holdings. Once the formalities are complete, the deed of extinction is signed and the company is cancelled at the Commercial Register.

Frequently asked questions