Publicado: 06-08-2024A company`s liquidation results in the official closing and and extinction of an enterprise. Upon a company`s liquidation, any outstanding debts to third parties are paid off, creditory pay debts back, and any remaining equity is divided among shareholders.
What are the different situations that lead to companies` liquidation in Spain?
In Spain, companies may face compulsory liquidation when:
- Their assets decrease to an amount lower than half of the share capital (legal minimum of €3.000) due to sustained losses
- Shareholders decide to cease activities, as communicated in a general meeting
- They are unable to meet financial obligations, leading to outstanding debts for at least six months
- The company defaults and its assets are pledged as collateral, taxes remain unpaid for at least three months, or assets are sold negligently
What is the process of liquidating a company?
When a firm needs to be liquidated, the following procedres are typically needed:
- The liquidation balance sheet should be drawn
- Consensus among the shareholders over the choice to dissolve and liquidate the business, the settlement amount, and the allocation of equity among the owners
- A certificate regarding the liquidation agreement accepted by the shareholders must be issued by the company director
- A Notary Public must witness the signing of the public winding-up deed
- The current account of the company needs to be closed
- The business needs to be officially taken off of social security and tax registries
What is the Organisational Structure of a Liquidated Company?
Upon the dissolution of a company, a dual organisational structure is maintained. This structure includes the general meeting of partners and a specific liquidation body.
- The general meeting: serves as the main decision-making entity, overseeing significant decisions related to the company`s winding-up process
- The liquidation body: replaces the administrative body that was active during the company`s operational phase. This new body is tasked with managing and representing the company during the liquidation period, ensuring that all activities align with the goal of dissolving the company in an orderly manner.
How are the liquidators appointed?
- Bylaws Provision: The company`s bylaws may specify the process for appointing liquidators, providing a clear protocol to follow
- General Meeting Decision: If the bylaws do not specify, the general meeting of partners assumes te responsibility of appointing the liquidators
- Automatic Appointment: In cases where the bylaws are silent and the general meeting fails to act, the directors at the time of dissolution automatically become the liquidators. This automatic conversion ensures that the company is not left without a management body during liquidation
What are the primary responsibilities of the liquidators?
The responsibilities of the liquidators are comprehensive, encompassing both internal management and external representation. These duties are crucial for the orderly dissolution of the company:
- Preserve the company`s assets
- Keep accurate and up-to-date financial records
- Complete any business operations that were underway at the time of the dissolution
- Collect debts owed to the company and to pay off its liabilities, ensuring that creditors are satisfied
- Convert the company`s assets into cash
- Represent the company in legal matters including lawsuits, transactions, and arbitration, when these actions are necessary for the benefit of the liquidation process
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