Company Liquidation in SpainUpdated on Monday 18th April 2016
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Foreign entrepreneurs who want to liquidate their companies opened in Spain should know the main legal provisions related to this procedure. The companies in Spain can be liquidated under certain circumstances:
- - if the company has a limited duration and the shareholders no longer want to continue the activity,
- - through the shareholders’ decision which must be consented in a general meeting,
- - through a court decision.
No matter what type of company liquidation you choose, you will need a lawyer in Spain who will offer assistance throughout the whole procedure.
A Spanish attorney will guide you through the main steps of the company liquidation procedure. Not knowing the Spanish legislation on liquidation, could lead to legal problems and even criminal charges.
The voluntary liquidation of a limited liability company
The most common type of company that is liquidated in Spain is the limited liability company. Voluntary liquidation is possible provided that the company has no debts and if the company’s targets have been achieved. The same principles can be applied to dormant companies as well; in case the shareholders decide to cease their existence. Voluntary dissolution must be deiced during a general meeting and if once the shareholders have agreed, a liquidator will be nominated to oversee and carry out the procedure. The liquidator will make sure all debts are accounted for and the creditors are paid. The rest of the assets or amounts will be distributed among the shareholders.
Once the dissolution is completed, a Spanish public notary will draft a deed of liquidation which will contain the final balance of the company and a list with all the shareholders and their liabilities. A stamp duty must be paid in a term of 30 days after issuing this document.
Compulsory liquidation in Spain
According to the Spanish Insolvency Act, compulsory liquidation must be requested by a creditor when a company can no longer pay its debts. In order to file for compulsory dissolution, the outstanding debt must be at least six months old. Compulsory liquidation will start as a debt collection proceeding ordered by a court. This type of liquidation may also be enforced under the following circumstances:
- - the company has defaulted;
- - the debtor’s assets are held as a guarantee for unpaid debts;
- - the debtor has failed to pay its taxes for at least 3 months;
- - the debtor has sold its assets in a negligent manner.
The creditor must submit evidence of their statements when lodging the application for compulsory liquidation. Based on the proof, a judge may issue court order for the debtor to appear before the court within maximum 5 days. Based on the evidence submitted by the plaintiff and the defendant, the Spanish court will rule in favor or against the liquidation. If ruling for the dissolution, an officer of the court will be appointed to carry out the proceedings.
We invite you to watch a short video about how you can liquidate a company, helped by our law firm in Spain: