Liquidate or dissolve society?– Commercial –
In several occasions clients have presented us their doubts as to if they can dissolve their company, and in fact often confuse the liquidation process with the dissolution process. For this reason, we think that this short article on our blog may be useful to many people, for in it we will try to explain in a straightforward way what it means to liquidate and what it means to dissolve a society.
In this article we will analyze these two stages of the process of extinction of a company, always from the perspective where the extinction is produced by agreement of the General Meeting without concurring any cause of those planned as a cause of dissolution by the Law of Capital Companies, but as a mere wish of the General Meeting, as provided in article 368 of the Capital Companies Law.
The first thing that must occur is the agreement of the General Meeting to dissolve, and this simple fact implies automatically that the liquidation of the same must begin. It is at this point that we can find two clear alternatives:
- The dissolution agreement is adopted and the settlement agreement is also adopted at that same act / meeting.
We will find ourselves in this first assumption provided that the company does not have creditors beyond the company’s own members and the company’s assets is liquid. This will allow the liquidation agreement to be adopted by assigning the assets to each member based on their settlement fee. In one act, then, the company is dissolved and its assets and liabilities are liquidated leaving the company to zero. If you can opt for this option, the cost is obviously lower because in one act and therefore with only one writing you get the extinction of the company. It is at this moment when the procedures will begin to stop having tax liabilities.
- The dissolution agreement is adopted and the liquidation stage is opened that will be extended over time.
Otherwise, we will find ourselves always that at the moment when it is agreed to dissolve, the company can not be liquidated for any given reason. This is usually because there are creditors who have to pay, or pending debts. However, we can also find that you do not want to dissolve and settle because there is some pending payment, such as a VAT refund. Note that we say that you are not interested, not that it can not be done.
In any case, dissolve and settle in a later act implies that the company will maintain the legal personality but the administrator will be ceased and a liquidator will be appointed, who will be responsible for liquidating the assets of the company in order to divide them and distribute them among the partners. During this phase of settlement, all activity must be directed to liquidating creditors and liquidate the assets of the company. Once this occurs, a new board meeting will be required to approve the liquidation proposed by the liquidator.
Therefore, and as a key idea, as long as we have a company with creditors we can adopt the dissolution agreement but we can not liquidate and extinguish the company (and therefore the company will continue to have legal personality and tax obligations) until all its credits (with the exception of the credits of partners) are liquidated.