In accordance with current legislation, the first step in the process of winding up a limited company (liquidating a limited company in Spain) involves producing tangible evidence that a majority of members have resolved to take such action. This resolution must be adopted at the Board Meeting of the company and based on any of the grounds indicated below:
- Equity capital has fallen below the legal minimum amount (€ 3,000).
- The company has fulfilled the purpose it initially set out to achieve.
- Recorded losses have reduced the company’s net worth to less than half the equity capital.
- The company’s governing bodies have become paralysed, meaning that the company can no longer operate effectively
- Any other grounds established in the Articles of Association.
Secondly, the liquidator must produce an inventory and balance sheet account of the company. Moreover, all outstanding debts must be settled, all credit in favour of the company must be recovered and all the assets of the company must be sold. All employment relationships between employees and the company must also be brought to an end. Finally, the company liquidator must produce a final balance sheet account which will be presented to, and approved by, the General Meeting. When it is approved, a Public Deed of Dissolution will be drafted and notarised by a Notary Public. This Public Deed of Dissolution must be registered in the Business and Trade Registry and any relevant documents of the dissolved company must be filed. Insofar as the members/directors are yet to distribute the assets and surplus cash, the company will continue to own its equity. As for the company members/directors, their representation will cease to be effective when the company announces its dissolution.
Arintass advises you to follow the process indicated in this article, in accordance with the Spanish Companies Capital Act. Please feel free to contact us with any questions or queries you may have about liquidating a limited company in Spain.