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Dissolution of a company due to the paralysis of corporate bodies

Disolución de una sociedad debido a la paralización de los órganos sociales
Dissolution of a company due to the paralysis of corporate bodies

In my last post, «Dissolution of public limited companies and limited companies» I made a brief analysis on the non-automatic dissolution of a company and the existing legal resources aimed at preventing a company in the process of dissolution from remaining in traffic indefinitely.

Continuing on from the previous one, in this post I am going to focus on a factual assumption that is very common in traffic and that we have dealt with numerous times in our Department of Commercial Law; the dissolution of companies in which the partners dispose equally, that is, 50 percent, of the share capital, because the confrontation between them causes such paralysis in the society that it is impossible to develop and fulfill the social purposes, which is why its dissolution is necessary.

In practice it is very common to find companies in which the partners do not even agree to dissolve the blocked company. Normally one of the partners hinders the execution of the legal procedures necessary for the declaration of dissolution and, later, liquidation of the company.

As a legal mechanism in these cases of social blockade, the LCS in its article 366 contemplates the possibility of social dissolution being judicially decreed. Although for this the following circumstances must be present :

  • Proof of the impossibility of calling a Meeting, its holding or the impossibility of adopting the dissolution agreements.
  • The request for dissolution must be directed against the company.

In these cases any interested party may request the dissolution of the company before the commercial judge of the registered office. However, the administrators are obliged to request the judicial dissolution of the company when the social agreement is contrary to the dissolution or cannot be achieved.

For the managing partner, it is not only a right to be able to judicially request the dissolution of the company in a situation of blockade, but it also supposes an obligation whose non-compliance entails the following consequences:

  • Responsible jointly and severally for social obligations subsequent to the occurrence of the legal cause of dissolution.
  • In these cases the social obligations claimed will be presumed to date after the occurrence of the legal cause for dissolution of the company, unless the administrators prove that they date earlier.

The mention made of the paralyzation of the corporate bodies as a cause of dissolution of the company, is the criterion that has been maintained by the jurisprudential doctrine, being a reference in this sense the sentence of the TS of February 15, 1982, which summarizes the doctrine contained in previous judgments and which is exposed as follows:

“ if in a Limited Liability Company, made up of only two partners, with equal participation and identical administrative powers, when disagreements arise between them, their dissolution could be agreed , prevailed by one of the partners with the opposition of another, reaching the affirmative conclusion, and this because, in the face of such conflicting positions, no decision could be adopted that would allow the development of the corporate purpose: a situation identical to that in the present case is subject to prosecution, establishing that such case must be considered included in paragraph 2 of article 30 of the Law regulating the Legal Regime of Limited Liability Companies, as it contains “a generic formula” for all those cases that truly are transcendent, and, in fact, subject to the rules of human judgment, produce the collapse of the company, making its normal operation impossible, permanently and definitively… because when there are two partners with identical social participation, since there is no possible majority, They must be considered family-type companies and of a personal nature, and it is in the case of subsidiarily applying No. 7 of art. 218 of the Commercial Code, which admits the special Law in its article 31…”

As we can see, in order for the dissolution mechanism briefly analyzed to be activated it is essential that the applicant prove the existence of an effective and insurmountable blockade of the company, that is, the inoperability of the General Meeting, the impossibility of calling and adopting the necessary agreements.

30/01/2017

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