Here we briefly explain how to wind up a company.
Written by Maria Teresa Garasa
Corporate lawyer
How do you close a company in Spain?
How to wind up a company:
As we have discussed on previous occasions, a company with outstanding debts cannot be wound up through a straightforward dissolution and liquidation. If a debt arises from pending litigation, the company cannot be dissolved until that debt has been settled.
If a company is dissolved (i.e., struck off) while debts remain outstanding, or while circumstances exist that may give rise to future debts (such as ongoing legal proceedings), both the company and the liquidator may be held liable for those debts. In other words, if there is a causal link between the dissolution and the non-payment — if closing the company prevents creditors from being paid — liability arises, and the creditor may bring a claim against both the company and the liquidator.
How to proceed with insolvency proceedings for a company:
The only proper way to close, wind up, or dissolve a company when debts remain outstanding is through insolvency proceedings. These proceedings allow the company's assets to be realised — converted into cash — in order to repay creditors to the extent possible.
You can find full information about insolvency proceedings at this link.
Stages in a winding-up:
It is possible to initiate the dissolution process (on the grounds of losses, as provided for under applicable legislation), appoint a liquidator, and then — for example — await the conclusion of any ongoing legal proceedings before formally completing the winding-up (dissolution) of the company. The dissolution of the company would therefore take place in two stages:
- Dissolution Phase (shareholders' meeting minutes, appointment of liquidator, deed before a notary and registration at the Commercial Registry)
- Liquidation Phase (shareholders' meeting minutes, final liquidation balance sheet, deed before a notary and registration at the Commercial Registry)
Requirements for proceeding with the winding-up of a company:
Between Phases 1) and 2), the liquidator's principal obligations are as follows:
- Draw up an inventory and a balance sheet of the company.
- Complete any pending transactions and carry out any new transactions necessary for the winding-up of the company.
- Collect outstanding receivables and settle the company's debts.
- Maintain the company's accounts, as well as keep and safeguard its books, documents and correspondence.
- Dispose of the company's assets.
- Keep shareholders and creditors regularly informed of the status of the liquidation.
- If the liquidation extends beyond the period provided for the approval of the annual accounts, the liquidators shall submit to the general shareholders' meeting, within the first six months of each financial year, the company's annual accounts together with a detailed report enabling the precise status of the liquidation to be assessed.
Responsibilities of a company liquidator:
The liquidator's responsibilities are similar to those of a director.
- They must prepare the company's balance sheets
- They must complete any pending transactions
- They must maintain the accounts
- They must convene meetings to fulfil obligations with the Commercial Registry
- They must carry out the winding-up operations
- They must collect outstanding credits and unpaid dividends
- They must negotiate settlements and submit to arbitration where necessary
- They must pay creditors and shareholders
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