Company Liquidation in Spain

Businessmen interested in company liquidation in Spain should verify the legal conditions regarding this procedure. Companies in Spain can be liquidated under certain circumstances, which can be detailed by our team of Spanish lawyers. At the same time, our attorneys can provide legal representation in this matter. 

What are the main situations for company liquidation in Spain?  

The manner in which a company can be liquidated in Spain is prescribed under the stipulations of the Law on Corporations. As a general rule, most of the companies are closed down due to the losses incurred during a certain period, which reduced the company’s assets to an amount lower than half of the company’s share capital. Other situations that determine the liquidation of a company are the following: 

• 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 the decision of a court in Spain, which can be determined by various legal issues;
• in the case of business entities registered aslimited liability companies, the liquidation can be started when the businesses have assets with a total value less than half of the EUR 3,000 threshold, which represents the minimum share capital in this case. 

Our team of Spanish lawyers can provide legal representation to those interested in closing a company in Spain, regardless of its company type. A local lawyer can assist with advice on all the steps involved in the liquidation of a company. Not knowing the Spanish legislation on dissolution could lead to legal problems and even criminal charges and this is why it is crucial to receive professional assistance.  

What is the law regulating company liquidation in Spain? 

The basic rule of law which regulates the manner in which company liquidation can be made in Spain is given by the Spanish Insolvency Act (also known as Law 22/2003). The legislation has been amended several times since it became applicable in Spain, the latest modifications being brought in 2015.  

This rule of law provides the legal framework under which insolvency proceedings can be started against natural persons and legal entities and it also stipulates the procedures for settlement between the creditor and debtor. Besides this rule of law, company liquidation in Spain can also fall under the regulations of the following: the Civil Procedure Act, the Securities Market Act, the Recovery and Resolution of Credit Institutions and Investment Services Firms Act, the Companies Act and the Supervision and Solvency of Insurance and Re-insurance Companies Act. 

We can help companies and individuals close their companies in Spain. Our services are available in every Spanish region. If you need assistance in the capital city, you can rely on our lawyers in Madrid.

The voluntary liquidation of a limited liability company in Spain 

The most common type of company that is liquidated in Spain is the limited liability company (as this is the most common business form registered in this country). The procedure for voluntary liquidation can be done as long as the respective business does not have debts, but also if the company’s objects of activity were achieved. 

The procedure can also be applied in the case of dormant companies. Voluntary dissolution must be decided during a general meeting and once the shareholders have agreed upon the procedure, a liquidator will be nominated to oversee and carry out the liquidation. The liquidator has as a responsibility to make sure that the debts are paid to the company’s creditors. The rest of the assets or amounts of money will be distributed among the shareholders.

The voluntary company liquidation is started by the company’s directors, who have a set of legal obligations during this procedure. Thus, the directors must organize the general meeting of the shareholders, in which the company’s investors will pass a resolution with regards to the dissolution of the company. 

In the case in which the shareholders do not reach a resolution during the general meeting of the shareholders or if the directors are not able to gather all the company’s shareholders for the purpose of organizing the general meeting, the directors can then apply to the Commercial Court, where they can initiate the liquidation of the company. 

After the directors have successfully managed the beginning phase of the compulsory liquidation procedure in Spain, they will lose the right to manage the company throughout this process, which will fall under the supervision of the appointed liquidators. Some of the main responsibilities of the liquidators are presented below: 

• they will assess the company’s current assets and will collect debts;
• they will pay the company’s creditors and will conclude the company’s financial transactions;
• they can also enter new financial transactions, as long as they are concluded for the purpose of liquidating the company;
• the appointed liquidator also has the responsibility of preparing the company’s balance sheet;
• once the liquidator completes the balance sheet, the company’s shareholders can challenge the results of the financial document. 

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 theshareholders and their liabilities. A stamp duty must be paid in a term of 30 days after issuing this document.  

The procedure stipulates that the company’s representatives have to provide a set of financial documents when applying for voluntary liquidation, such as the last three annual accounts, tax and audit reports and, depending on the company’s business form – subsidiary or branch, additional documents can be requested.  

Those who have the possibility of starting the voluntary company liquidation process must know that this is generally the most cost efficient option; our team of Spanish lawyers can present any additional information regarding the legal procedures that should be concluded when entering the voluntary company liquidation. Our attorneys can also help you with opening a company in Spain, a process that can take a few weeks, the time frame depending on the type of legal entity you want to incorporate. 

Cease of activity

Companies and self-employed individuals can choose to cease their business activities but still remain legally active. This is an alternative for those who do not wish to close a company in Spain definitively. Our Spanish attorneys list some of the requirements for a company after it ceases its operations: 

• Must not issue invoices related to its business activities;
• Must keep accounts as per the Commercial Code and General Accounting Plan;
• Must continue to file corporate income tax returns;
• Must file any withholding declarations;
• Must file VAT statements for any invoices from when it was still active to get VAT refunds;
• Must file any required annual report.

If you do not want to close a company in Spain, you must follow the specific procedures. This includes ending all employment contracts, canceling the company’s social security contributions account, informing the relevant authorities, and de-registering from the Census of Employers and Professionals and the Economic Activities Tax. The procedures are different for companies and self-employed individuals. Our Spanish lawyers can offer a detailed guide in each case.

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 certain circumstances, for example, the company has defaulted and the debtor’s assets are held as a guarantee for unpaid debts, the debtor has failed to pay the taxes for a period of at least three months or the debtor has sold his/her assets in a negligent manner.

The creditor must submit evidence of the statements when lodging the application for compulsory liquidation. Based on the proof, a judge may issue a court order for the debtor to appear before the court within maximum five 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 dissolution, an officer of the court will be appointed to carry out the proceedings.

Compulsory liquidation is started by the company’s creditors, in accordance with the Article 3.1 of the Law 22/2003. The procedure may also be requested by thecompany’s shareholders or theboard members of the business, who are liable for the respective debts, as perArticle 3.3of the above mentioned law.  

If you are interested in other details related to the liquidation of your company, you may address to our lawyers in Spain who will provide assistance during the whole procedure of dissolution. Our law firm in Spain is specialized in offering consultancy services and legal representation for any type of liquidation procedure.

How can creditors recover their debts in Spain? 

There are several legal procedures through which creditors can recover their debts. The procedures can be explained by our law firm in Spain but, as a general rule, most of the cases will be handled through ordinary proceedings. These refer to legal actions through which the debtors are required to repay a debt. The ordinary proceeding is completed by the ruling of a court resolution.  

Creditors can also apply other legal measures, such as monetary proceedings, special proceedings for bills of exchange or proceedings established for the purpose of executing unpaid mortgages. Our team of Spanish lawyers can present more information concerning these legal actions. Debt collection can also happen in the case of real estate properties. In this case, we recommend to seek assistance from our property lawyers in Spain.

We invite you to watch a short video on how you can liquidate a company, helped by our law firm in Spain:

Differences between dissolution and liquidation of a company

The dissolution and liquidation of a company in Spain are two different stages in the procedure of terminating a company.

Dissolution is the first step in the closure process where the company decides to cease operations. It can be done through a resolution by the shareholders or a court order. The decision to dissolve must be registered with the Mercantile Registry, making the intention to dissolve public. It is a mandatory process an entity must undergo to wind up a company in Spain definitively. Dissolution also involves appointing liquidators to meet all legal and fiscal responsibilities. Our law firm in Spain can help you in this case. Please note that the company is still legally active during dissolution.

Company liquidation in Spain is the process that follows dissolution. Liquidators will convert assets to cash to pay off debts and settle any remaining legal obligations (such as ending employment contracts). The remaining assets are distributed to shareholders based on their shares. The process ends with the preparation of a final liquidation balance sheet, which is filed with the Mercantile Registry.

The termination of a company occurs after the liquidation process is fully completed. During this step, the company is legally considered non-existent.

We can assist in every step and procedure of closing a company in Spain. Our services are available in multiple Spanish regions. Our lawyers in Barcelona can help you if you reside in the area.

What is the data on bankrupt companies in Spain? 

Compared to the overall number of legal entities registered with the local institutions, the number of companies that became bankrupt is rather small. The data on bankrupt businesses presents the following: 

• 6,506 companies were declared bankrupt in 2023;
• 7,272 companies declared bankruptcy in 2022;
• In 2021, 5,862 companies declared bankruptcy;
• In 2020 there were only 4,376 bankrupt companies.

If you have a business registered in Barcelona and you need to start the liquidation procedure, you can rely on our team of lawyers in Barcelona, who are ready to provide you with the necessary legal assistance during this step. We can present the steps you need to take depending on the situation of your business, and we can provide you with any other information regarding the law on liquidation. We also invite you to address to our lawyers in Madrid in the case you experience the same situation with a business that is set up here.

Our property lawyers in Spain can give you advice on the bankruptcy/liquidation procedures applying to your property.

For any questions regarding company liquidation or termination, please contact our team of Spanish lawyersfor assistance. Our lawyers can also help you start an LLC in Spain with a share capital of EUR3000.