The title of this entry should be understood in a not very technical sense, since closing a company, legally, is its process of dissolution and liquidation, whose causes and procedure, we will try to expose in the following lines, focusing on those aspects that I consider most relevant. and passing sideways by others, due to the breadth of the matter.
Anyway I would recommend this entrance, which in a friendly way and without excessive technical aspects, describes the closure of a company, with reference to possible problems between partners.
This process is regulated in articles 360 of the capital companies law and in articles 238 of the Mercantile Registry Regulations, and different tax laws must also be taken into account, since the liquidation has tax consequences both in the company itself liquidated, as in the partners who receive the liquidation fee.
I.- THE CAUSES OF LIQUIDATION. Articles 360-368 LSC.
From the set of these precepts we can distinguish three groups of causes for the dissolution of companies:
a.- The dissolution of full rights, which includes article 360 LSC
b.- The dissolution for legal or statutory reasons, which includes article 362 LSC.
c.- And the voluntary dissolution or by mere agreement of the general meeting, which includes article 368 LSC.
However, we are going to focus on those causes that derive from a Shareholders' Meeting agreement, and that, on the other hand, are those that are documented in the notaries, since the causes of article 360 LSC operate automatically and judicial dissolution has its process regulated in articles 125 and ss LJV.
With respect to judicial dissolution, it should be noted that if the company incurs in a legal or statutory cause of dissolution, and there is no agreement of the Board, the administrators, partners and any interested party are entitled to request the judicial dissolution of the company (article 126.2 LJV), being the criterion of the courts (vid SAP Madrid 10/3/2013 and SAP Girona 07/02/2014), that both the partners and the administrative body can resort directly to the judicial dissolution, without the need for prior call or celebration of the Meeting, since the cause of dissolution can be verified, indistinctly by the Meeting of partners or by judicial decision, without establishing any requirement for access to the jurisdiction.
But returning to the dissolution by agreement of the Board of partners, we must differentiate between:
a.- The agreement verified by the Board and caused, in any of the cases of article 363 LSC.
b.- And the mere dissolution agreement that includes article 368 LSC
The difference between whether the agreement is based on any of the legal causes or not, is in the precise majorities for its adoption., because according to article 364 LSC, if there is cause, the dissolution of the company will require an agreement of the general meeting adopted with the ordinary majority (non-derogable established for limited liability companies in article 198, and with the constitution quorum and majorities established for corporations in articles 193 and 201), while if there is no cause, the dissolution agreement must be adopted with the precise majorities for the modification of the bylaws (article 368 LSC).
This is so, because the decision to extinguish a company supposes, for practical purposes, a kind of modification of the corporate object or corporate purpose, since as a consequence of the dissolution the will is expressed that the company does not continue its ordinary activities and that the original object is replaced by the activities of collecting credits, paying debts, and distributing the resulting assets among the partners.
Therefore, once the dissolution agreement has been adopted, and as the company opens the liquidation period (article 371 LSC), it must add the expression "in liquidation" to its name, which is a warning of what we have indicated in the previous paragraph.
In other words, as a result of the dissolution agreement, the company retains its legal personality and the General Meeting of partners remains as the supreme body, but there is a significant change in the management and representation body.
1.- On the one hand, the administrators are replaced by the liquidators, whose mission is not to develop the corporate purpose, but rather the activities leading to the distribution of the assets among the partners, having to ensure the integrity of the corporate assets as long as it is not liquidated and distributed among the partners (article 375 LSC).
2.- And on the other hand, the Shareholders' Meeting subsists, but with different powers, specified in supervising the work of the liquidators, without prejudice to being able to adopt agreements that facilitate the liquidation of the company (for example, a change of address or its transformation) or that imply the paralysis of that process, such as the reactivation, or its participation in the merger or spin-off process.
II.- LIQUIDATORS.
The first consequence of judicially decreeing (with the exception that the dissolution would have been a consequence of the opening of the liquidation phase of the company in bankruptcy) or the dissolution of the company being adopted by the Shareholders' Meeting is the termination of administrators and thus article 374 LSC tells us:
1. With the opening of the liquidation period, the administrators will cease to hold office, extinguishing the power of representation.
2. The former administrators, if required, must provide their collaboration for the practice of liquidation operations.
Simultaneously to the removal of the administrators, the company must be provided with a new administration and representation body, with specific powers, such as the liquidators.
There is no option to resolve the dissolution without appointment or determination of the liquidators, since the company would otherwise be left in a case of acephaly.
a.- Appointment of liquidators (article 376 LSC)
First of all, it is possible that the bylaws determine who the liquidators of the company are, with the widest freedom, designating specific persons or per relationem, or simply, as it is most frequent to foresee that in the absence of an express agreement to the contrary, the administrators they become liquidators.
In second place, It is possible for the General Meeting that agrees to the dissolution of the company, to proceed to the appointment of liquidators, with the widest freedom. In any case, in those cases in which administrators have been appointed by the bylaws, the agreement to appoint administrators to persons other than those provided for in the bylaws, should be adopted with the majority necessary to modify the bylaws.
In third place, if neither of the two previous cases occurs, it will be the administrators themselves who become liquidators, which must be reflected in the corporate agreements, and without prejudice to the possibility of resigning from the position of liquidator.
b.- Appointment of liquidators in case of judicial liquidation. (article 377 LSC)
The possibility of judicial appointment of the liquidator is not expressly provided for in the Capital Companies Act.
However, and despite there being some pronouncement to the contrary, the majority Jurisprudence (vid Judgment of the Commercial Court 1 of San Sebastián dated November 7, 2016), with good judgment, applies by analogy article 377 LSC, and maintains that in situations of blockage, as can happen in cases of judicial dissolution, the liquidator can be appointed by the judicial authority, if he had not been appointed by the Shareholders' Meeting.
c.- Compatibility with other positions.
The necessary nature of the position of liquidator is incompatible with the existence of administrators.
The recent RDGyN of March 7, 2019, reiterating its consolidated doctrine, indicates that "produced the cessation of the administrative body due to the dissolution of the company and opening of the liquidation and having been appointed liquidators, who accept their position, it is not possible to extend the position of those to a later moment because the coexistence of both bodies is not possible in our legal system”.
On the contrary, the powers that have been granted before the dissolution of the company, in theory subsist, although in accordance with the principles of good faith, it would only be possible for the attorneys to use them as long as they serve to complete the liquidation of the company. .
In this sense, if as indicated in the DGRyN Resolution of September 3, 1998, the new operations that liquidators are allowed are those whose purpose is to facilitate or enable said liquidation, and not those whose purpose is to prolong the active life of society, the same criteria must be preached with respect to the attorneys.
The liquidators could also grant powers to third parties to collaborate with them in liquidation operations or to represent the company in judicial or administrative proceedings.
d.- Referral to the regime of administrators.
Those circumstances related to the regime of liquidators not provided for in the law must be completed with the regulations provided for administrators.
III.- THE LIQUIDATION TERM.
The law does not establish any term for the liquidation of the company to be completed, from the moment its dissolution is agreed. The only existing forecasts are
a.- If the liquidation is prolonged for a period longer than that established for the approval of the annual accounts, the liquidators will present to the general meeting, within the first six months of each fiscal year, the annual accounts of the company and a detailed report that allow to accurately appreciate the state of the liquidation. (article 388 LSC).
b.- If three years have elapsed since the opening of the liquidation without the final balance of the liquidation having been submitted for approval by the general meeting, any partner or person with a legitimate interest may request from the Court Clerk or Commercial Registrar of the registered office the separation of the liquidators. (article 389 LSC)
However, in small companies, when the liquidation is simple, because there are no creditors, the resolutions adopted in the Universal Meeting and unanimously, of dissolution and the subsequent ones necessary to extinguish the company are usually adopted simultaneously and in a single act. ,
IV.- THE LIQUIDATION PROCEDURE.
a.- Inventory and liquidation balance. (First obligation of liquidators).
The initial duty assumed by the liquidators (ex 383 LSC), is that within three months from the opening of the liquidation, they will formulate an inventory and a balance sheet of the company with reference to the day on which it was dissolved.
The wording departs from what the law of public limited companies said in its article 272 LSC, in the sense that this balance and inventory should be subscribed by the liquidators, together with the Administrators.
It seems more appropriate, with what is a liquidation process, to understand that this balance and inventory must be made by the administrators and also be signed by the liquidators, as a transfer of powers.
to).- The balance, according to the majority doctrine, must be formulated with the same criteria used to formulate the annual accounts, being the last ordinary accounts of the company, since the dissolution agreement closes the last ordinary fiscal year of the company.
That is if, once the company is dissolved, there is no obligation to prepare annual accounts during the liquidation period, being replaced, such obligation, in case the liquidation is prolonged for a period longer than that established for the approval of the annual accounts, for presenting by the liquidators to the General Meeting, within the first six months of each financial year an annual statement of accounts and a detailed report that makes it possible to accurately assess the situation of the company and the progress of the liquidation. (article 388 LSC) and that according to article 365.2 RRM must be deposited in the Mercantile Registry.
In this sense, the DGRyN Resolution of November 18, 2013, indicates that in companies in liquidation, the administrative body, the liquidators, are obliged to prepare the annual accounts (article 253 in relation to 386), to convene a meeting for its approval (article 164 in relation to 166 of the Consolidated Text), as well as to present them in the Mercantile Registry for their deposit in accordance with the general rules (article 279). This has been stated by this Directing Center in its Resolutions of November 8, 2000, July 8, 2005 and May 3, 2006.
And as the DGRyN Resolution of May 26, 2009 points out, the obligation to audit the accounts subsists during the liquidation phase, given the essentially reversible nature of said situation.
But if, as happens, which is very frequent in practice, because the liquidation period is very short or even simultaneous to the adoption of the resolution of dissolution, a complete fiscal year does not take place, there is no preparation of annual accounts or call for board for approval.
Keep saying the aforementioned resolution of November 18, 2013, that, even in this case, the safeguarding of the general principles and the protection of the interests of the partners is legally guaranteed by imposing the Capital Companies Act the obligation on the liquidators to present a final balance sheet to the shareholders' meeting (article 390 ), without whose approval the liquidation operations cannot be considered terminated or the appropriate registration in the Mercantile Registry (article 247.2.1.ª.3 of the Mercantile Registry Regulations) can be requested.
Redounding these ideas, the DGRyN resolution of September 20, 2001, states that a deed of dissolution, appointment of Liquidator and extinction of the company can be registered even if the page of the same is closed by lack of deposit of accounts annual.
The meaning of this registration closure is to serve as a stimulus for the company itself to opt for the deposit of the accounts or the extinction. That is why the appointment of liquidators is excepted. And, once the liquidation has been carried out, it makes no sense to condition the registration reflection of the extinction of the company to the fulfillment of a requirement foreseen for the situation in which the company is alive.
2.- The inventory It is an internal document that aims to provide knowledge of all the elements that make up assets and liabilities.
b.- Collection of credits, payment of debts and realization of goods. (articles 385 and 387 LSC)
The typical liquidation operations are the collection of credits, the payment of debt and the realization of assets.
Both the payment of debts and the collection of credits can and must be carried out in accordance with the general civil and commercial regulations.
We can highlight the following specialties:
1.- Passive dividends.
Article 385.2 LSC.- In corporations and limited by shares, the liquidators must receive the pending disbursements that were agreed upon at the time of beginning the liquidation. They may also demand other pending disbursements until completing the nominal amount of the shares in the amount necessary to satisfy the creditors.
2.- Partners-creditors.
It is possible that among the company's creditors the partners themselves can be counted, either as holders of ancillary benefits, or through voluntary contributions that have not been integrated into the capital, uncollected profits... Their position is the same as that of any third party.
The DGryN in a resolution of November 6, 2017, even starting from the basic principle that prior payment to creditors is "an inexcusable requirement for the distribution of the company's assets among the partners and the consequent proof of the extinction of the company", it indicates that no obstacle can oppose the statement that the liquidator makes about the fact that that, with the consent of all the partners, the outstanding debts with them have been extinguished by confusion for having been "awarded" to them in proportion to their respective shares, an expression that can be understood as a waiver of their enforceability, or even as inability to collect in the absence of social assets.
3.- Liquidation of companies with a single creditor.
The DGRyN Resolutions of August 1 and 8, 2016, after certain fluctuations, discarding the doctrine established in those of July 2 and October 4, 2012, and following the previous one of the resolutions April 13, 2000 and April 29, 2011., have indicated that it is possible to liquidate companies in which there is only one creditor, identified or not, and without sufficient assets for its payment, without there being any problem for the registration of this extinction with cancellation of the existing registry entries on the sheet open to society and without the need to call for competition.
4.- Disposal of social assets.
Article 387 LSC declares that the liquidators must dispose of the corporate assets.
The purpose of the sale is to obtain the necessary money to pay the corporate debts and once these are covered, make the liquidation fee of the partners effective, without being subject to the limitation, established by the LSA, that the sale must be made at public auction.
However, by statute, there may be limitations to the sale, when it is expected that all or some assets will be restored to the partners who contributed them, or when the distribution in nature has been established as a general rule.
c.- Formulation of the final liquidation balance.
Once the operations described in the previous section have been completed, the liquidators must formulate the final liquidation balance, which, as the DGRyN has repeatedly pointed out (resolutions of October 29, 1988, March 11, 2001, and July 6, 2001 ), does not necessarily have to comply with the legal regulations on the preparation of annual accounts, but can be prepared in a very simple way, so that it serves to establish the distributable social patrimony and determine exactly the part that corresponds to each partner. in the same,
The only requirement that the DGRyN has maintained in the resolution of October 29, 1998 is the need to state the share capital, although it has been somewhat softened by having admitted the existence of discrepancies between the registered Capital Stock figure and the figure resulting from the final Balance of liquidation, given that as a consequence of this, the company will become extinct and that for the creditors there is no risk as the legal liquidation procedure has been observed, their credits having been satisfied and there being no room for any distribution among the partners due to non-existence of Active.
Starting from the premise that for the liquidation of a company, the debts must have been paid, (with the possible exceptions that we have indicated previously), if as a consequence of the liquidation operations all the assets have been disposed of, the assets of this The liquidation balance will be made up solely of a treasury account and the liabilities would be made up of the share capital figure and another profit or reserve account if what is distributed is greater than the share capital figure, or a loss account if what distributed is less than the share capital amount.
An example of a settlement balance structure for these cases would be
| ASSET | PASSIVE | ||
| Treasury | 50.000,00 € | Capital | 6.000,00 € |
| Res./ben. | 44.000,00 € | ||
| Total | 50.000,00 € | Total | 50.000,00 € |
If assets are going to be awarded to the partners, the most reasonable thing to do, as a guarantee of a correct distribution and of acting in accordance with tax legislation, is to put the real value in the liquidation balance sheet, and not merely the book value.
An example of a settlement balance structure for these cases would be
| ASSET | PASSIVE | ||
| Immobilized | 100.000,00 € | Capital | 6.000,00 € |
| Treasury | 85.000,00 € | Res./ben. | 179.000,00 € |
| Total | 185.000,00 € | Total | 185.000,00 € |
The final balance of liquidation, together with a complete report on said operations and a project of division between the partners of the resulting assets, must be submitted for the approval of the General Meeting and may be challenged by the partners who have not voted to favor of the same, within a period of two months from the date of its adoption. (article 390 LSC).
From a totally practical point of view, it turns out that if the dissolution and liquidation agreements have not been adopted unanimously, the deed documenting such agreements can only be granted after a period of two months.
In this sense, article 247.2 RRM obliges the liquidators to state in the company's liquidation deed that the period to challenge it has elapsed, without any claims having been made against it, or that the judgment that resolved them has reached finality. .
d.- Division of social assets. (Articles 392 and ss LSC)
The last phase of the liquidation procedure is the distribution of the social remnant among the partners.
With this, it is achieved that the partners can recover what they contributed to the company and participate in the accumulated and undistributed benefits, through their right to the liquidation quota.
The only limitation is the need to previously satisfy the creditors of the amount of their credits or their consignment in a credit institution in the municipality where the registered office is located.
For this reason, the DGRyN has indicated that an early distribution is not possible, both directly (through advances on account of the settlement fee) and indirectly (reduction of share capital with return of contributions). A. May 22, 2001, A. July 23, 2001
a´) The proportional distribution.
Unless otherwise provided in the bylaws, the liquidation fee corresponding to each partner will be proportional to their share in the share capital.
Exceptions to this proportional distribution would be the cases of privileged shares/participations (article 95 LSC) or non-voting shares/participations (article 101 LSC)
In corporations and limited partnerships by shares, if all the shares have not been released in the same proportion, the excess over the contribution of the shareholder who has paid less will be restored first to the shareholders who have paid in greater amounts, and the rest will be distributed. among the shareholders in proportion to the nominal amount of their shares.
b´) The content of the settlement fee
The general rule is that the settlement fee must be paid in cash.
The in nature payment of the liquidation fee to the partners, except for special statutory provision, is limited, as happens in capital reductions, due to the need for unanimous agreement,
In this sense, as indicated by the DGRyN Resolution of February 14, 2019, following the criteria of the resolutions of February 13, 1986, November 5, 1997 and July 6, 2001, it indicates that (...) directed the liquidation to the determination of the existence or non-existence of a remnant of assets to be distributed among the partners for, (...) , it is essential to formulate a final balance sheet that must faithfully reflect the patrimonial state of the company once the liquidation operations that that determination behaves. This balance sheet must be submitted for approval by the general meeting together with a complete report on said operations and a project for the division of the resulting assets among the partners (article 390 of the Capital Companies Act). This division project is nothing more than a proposal for the distribution of the resulting assets among the partners that must comply with the rules established in articles 391 to 394 of said law, and among them the one related to the content of the liquidation quota according to which " except by unanimous agreement of the partners, they will have the right to receive in money the fee resulting from the liquidation.
If there is any statutory provision that the liquidation quota of some partners will be satisfied by restitution of the non-monetary contributions made or by delivery of other corporate assets, if they remain in the corporate assets, these will be appraised at their real value at time to approve the division project between the partners of the resulting asset.
In this case, the liquidators must first dispose of the other company assets and if, once the creditors have been satisfied, the resulting asset is insufficient to satisfy all the partners their liquidation quota, the partners with the right to receive it in kind must pay previously in money to the other partners the corresponding difference.
As a way of preparing a liquidation, it can be extremely useful to modify the statutes, to establish the right of one of the partners, to receive that liquidation fee in nature. In this way, we have a legal rule that covers the payment of differences in money (by way of extra-hereditary money) and avoids different possible tax corrections for excess allocation, since the basis is the same as that provided for in articles 821, 829, 1,056 (second) and 1,062 (first) of the Civil Code and Statutory Law Provisions, based on the same foundation.
In this sense, you can see the binding consultation 2019/2015 of the DGT of June 29, 2015, which has indicated that if an imbalance occurs due to the impossibility of forming lots equivalent to the participation quota of each partner due to the existence of an indivisible asset (indivisibility that must be understood as referring to the set of assets) and also said imbalance is compensated in money, the excess allocation is not taxed by the ITP modality.
c´).- Adjudication of assets encumbered with a mortgage.
In the event that the assets awarded to the partner were encumbered with a mortgage, the consent of the mortgagee would also be required, in accordance with the general rules of the Civil Code (article 1205 CC) for the novation of obligations.
d´) Payment of the settlement fee
The payment of the liquidation fee corresponds to the liquidators, in the manner that is agreed or considered convenient.
Settlement fees not claimed within the ninety days following the payment agreement will be deposited in the General Deposit Box, available to their legitimate owners.
In the event that the liquidation fee is paid in real estate, the acceptance in public deed of the winning partner will be necessary, for registration in the Property Registry.
e.- Formalization of the deed of dissolution. Article 395 LSC and 365 RRM
Once the liquidation operations are completed, the liquidators will grant a public deed of extinction of the company that will contain the following statements:
a) That the term for challenging the agreement to approve the final balance sheet has elapsed without any challenges being filed or that the judgment that resolved them has reached finality.
b) That creditors have been paid or their credits consigned.
c) That the settlement fee has been paid to the partners or its amount consigned.
The final balance of liquidation and the relationship of the partners will be incorporated into the public deed, stating their identity and the value of the liquidation quota that would have corresponded to each one.
f.- Cancellation of registry entries.
1. The public deed of extinction will be registered in the Mercantile Registry.
2. In the registration, the final balance of the liquidation will be transcribed and the identity of the partners and the value of the liquidation quota that would have corresponded to each one of them will be recorded, and it will be stated that all the seats related to the society.
3. The liquidators will deposit the books and documents of the extinct company in the Mercantile Registry.
V.- INCIDENTS SUBSEQUENT TO THE DISSOLUTION AND LIQUIDATION OF THE COMPANY. Surviving assets and liabilities.
For reasons of brevity we refer to the legal standard without prejudice to its separate development in other entries.
Article 398. Sudden asset.
1. Once the entries relating to the company have been cancelled, if corporate assets appear, the liquidators must award the former partners the additional quota that corresponds to them, after converting the assets into money when necessary.
2. After six months have elapsed since the liquidators were required to comply with the provisions of the previous section, without having awarded the former partners the additional quota, or in the event of a defect of liquidators, any interested party may request the judge of the latter registered office the appointment of a person to replace them in the performance of their duties.
Article 399. Surviving liabilities.
1. Former partners will be jointly and severally liable for unsatisfied company debts up to the limit of what they would have received as a settlement fee.
2. The liability of the partners is understood without prejudice to the liability of the liquidators.
VI.- TAXATION OF THE EXTINCTION OF THE COMPANY.
The extinction of the company produces various tax consequences, as we have indicated at the beginning of the entry, both in the company and in the partners.
a.- The taxation of the company that is liquidated.
Pursuant to article 27 LIS, which refers to the tax period for corporation tax, in any case the tax period will end: a) When the entity is extinguished.
Such extinction occurs with the cancellation entry in the Mercantile Registry, since the dissolved company retains its legal personality.
The consequence of this is that a company in liquidation must submit the Corporate Tax returns for the tax periods that conclude during the liquidation process, as well as the return corresponding to the last tax period, which will end on the date of extinction of the company in liquidation and this regardless of whether the fee to be deposited or returned is nil.
At the end of this last fiscal year with the liquidation of the company, the income generated up to that moment will be subject to taxation in accordance with the general rules of corporation tax.
b.- The taxation of the partners.
At this point we can differentiate direct taxation and indirect taxation.
a´.- Direct taxation.
a¨) Individual partners. personal income tax
In accordance with article Article 37.1.e) LIRPF "in cases of separation of partners or dissolution of companies, capital gain or loss will be considered, without prejudice to those corresponding to the company, the difference between the value of the liquidation fee social security or the market value of the assets received and the acquisition value of the title or corresponding capital participation”.
b¨) Partners that are legal persons. ES
The company that is a partner of the entity that is dissolved, must include in its tax base the difference between the normal market value of the elements received and the book value of the annulled participation, with the possible corrections provided for in article 21 LIS.
b´) Indirect taxation. IOS and VAT
In the liquidation of a company, the corporate operations tax is accrued, with the partners being taxable for the goods and rights received. This taxation is at 1% of the value of the settlement fee, regardless of whether it is greater or less than the nominal.
This tax is compatible with VAT, since as indicated in article 8.Two of Law 37/1992, of December 28, on Value Added Tax, deliveries of goods are considered:
2nd. (...) The non-monetary contributions made by the taxpayers of the Tax of elements of their business or professional assets to companies or joint ventures or to any other type of entity and awards of this nature in the event of total or partial liquidation or dissolution of those, without prejudice to the taxation that proceeds in accordance with the regulatory norms of the concepts "documented legal acts" and "corporate operations" of the Tax on Patrimonial Transfers and Documented Legal Acts.
c.- Other tax consequences. IVTNU
In the event that the settlement fee of the partners is paid in urban real estate, the municipal capital gains can accrue on the increase in the value of urban land.
VII.- AN ALTERNATIVE TO THE DISSOLUTION OF THE COMPANY.
As an alternative or as a previous step, to the liquidation, there is the possibility of declaring the cessation of the activity in the Treasury. Through termination, the company subsists, with the obligation to present the company taxes for each year without activity, but with the possibility of reactivating it at any time.
In the event that in accordance with article 119 LIS the deregistration of the company has been declared in the Tax Agency index, the closing of the sheet open to the entity in the Mercantile Registry is produced, and no registration can be made that it concerns until the certification of registration in the Index of Entities is presented, with the sole exception of the registration of documents ordered by the judicial authority.
