Dissolve a company with debts
The scenarios that companies are having to face due to the crisis caused by COVID-19 are diverse. The limitation of the mobility of people and the suspension or limitation of certain sectors of activity, among other measures adopted to minimize the risk of sanitary collapse, are having a great impact on the operation of companies, as has been the case since last month. March.
With this scenario, companies may be affected by insolvency situations, as well as delays in meeting their enforceable obligations. Non-payments can be of a different nature, amounts owed to creditors or unpaid wages to workers, among others, but they are all the consequence of a lack of liquidity. At this point, and before the company continues to generate a larger deficit, the best thing to do is to close the company.
There is a simple solution to close a company, based on liquidation due to concurrence of one of the causes of dissolution. The causes of dissolution can be by law, legal or statutory. It is also possible that the General Meeting agrees to the voluntary dissolution by agreement of the partners.
It may interest you: “How to dissolve a company if one of the partners does not want to”
Full-fledged causes of dissolution
Focusing on the full causes of dissolution, the Capital Companies Law in its article 360 establishes the same, therefore, the dissolution will proceed for the course of the established term of duration in the bylaws, or for one year from the adoption of the agreement to reduce the capital below the legal minimum, without the corporate transformation, dissolution of the company or capital increase having been registered in the Mercantile Registry.
On the other hand, the following are causes of legal or statutory dissolution, which will have to be verified by the general meeting or by judicial resolution:
- The cessation of the activity or activities that constitute the corporate purpose for a period of more than one year, the conclusion of the company that constitutes its purpose, as well as the manifest impossibility of achieving the corporate purpose or the cessation of the corporate bodies.
- Losses that reduce the net worth below half of the share capital or due to the reduction of the share capital below the legal minimum.
- If the nominal value of the shares or non-voting participations exceeds half of the paid-up capital during a period of two years.
Credits in favor of third parties or workers
However, in the event that there are credits in favor of third parties or workers, that is, debts that cannot be satisfied, the most appropriate way to close the company is by requesting a voluntary bankruptcy to proceed with the orderly liquidation of the company, since with the opening of the liquidation phase of the bankruptcy the full dissolution of the company will take place.
Therefore, the only alternative to be able to liquidate a company with debts requires bankruptcy proceedings, which entails the necessary judicial intervention.
If the company has assets, the procedure will be processed in the usual way. The bankruptcy process will begin before the competent commercial court by means of a voluntary bankruptcy request, submitted by the company administrator, or by means of a necessary bankruptcy request, requested in this case by the creditors. After the order that determines the declaration of bankruptcy, the bankruptcy administration will be appointed to be in charge of the liquidation of the company, managing the different assets of the company to meet the debts that it had.
It may interest you: “Dissolution of corporations and limited companies”
What happens when the company has debts but no assets
The Royal Legislative Decree 1/2020, which approves the consolidated text of the Bankruptcy Law, establishes in its articles a mechanism to dissolve the company more quickly, which is known as express contest.
In cases where the company is currently insolvent, but does not have assets, or this is insufficient to satisfy even the claims against the mass, it will be possible to agree in the same car that declares the contest, the conclusion of the same.
The necessary requirements to proceed with the dissolution and liquidation of the company with debts and without assets are:
- That a reintegration of assets into the bankruptcy estate is not foreseeable, that is, that assets that have left the bankrupt’s estate within the two years prior to the declaration of bankruptcy cannot be recovered, in such a way that they harm its active mass.
- That the bankruptcy is not classified as culpable, that is, that the management bodies of the company with their management have aggravated the state of insolvency of the company with negligence or fraud.
Therefore, for companies that are in a situation of insolvency and that do not have assets to meet their debts, the express bankruptcy is the fastest and least expensive alternative. expensive to dissolve the company.
JL.Casajuana Abogados is a law firm with experience in advising and managing business crises, liquidation and dissolution of companies, which will help and guide you during the closing process of your company.
It may interest you: “Lawyers specialized in Bankruptcy Law”