The process of company liquidation
If, when drawing up the balance sheet, it is found that the company's assets are insufficient, the liquidators must apply for a declaration of insolvency.
The following are some of the compulsory procedures:
The annual accounts during the liquidation: during the liquidation period, the company is not obliged to draw up annual accounts, being a direct consequence of the new corporate purpose which is none other than the extinction of its legal personality.
Company operations: it is necessary to warn that the company cannot be terminated while there are contracts pending execution, in order to protect the security of economic traffic. Unlike what happens in insolvency proceedings, the commercial liquidation process does not produce any effect on contracts in progress.
Payment of corporate debts: payment to creditors is the typical operation of corporate liquidation, which may lead the company to go into bankruptcy if it cannot meet its budget.
Collection of company debts: the liquidators must collect the company's debts by all the means available to them under the law, while respecting the established payment period.
Keeping of accounts and conservation of books: The liquidators must keep the books, documentation and correspondence of the company, and keep them, duly ordered, during the six years following the year in which the last entry was made.
Disposal of company assets: the purpose of the liquidation is not to convert the company's assets into cash once the creditors have been paid, but to make a net asset which can be distributed among the shareholders in proportion to their share in the company capital.
Information for shareholders: this duty ranges from the general obligation to periodically inform shareholders and creditors of the status of the liquidation.
Final liquidation balance sheet: the liquidators must draw up the final liquidation balance sheet, as well as a complete report of the liquidation operations. The final balance sheet is a closing account, which will accurately reflect the state of the company's assets once the liquidation operations have been carried out.
What effects does the liquidation of a company have?
The liquidation of a Company must be made public before the Notary through the deed of extinction of the Company. The liquidation of the Company can be carried out in the same act.
Once the liquidation is registered before the Notary, we must register it before the Mercantile Registry, immediately afterwards, the registration entries will be canceled and the extinction of the company will take full effect. Likewise, the liquidator must deposit the books and documents of the extinguished company in the Mercantile Registry.
We remind you that at Forcam Abogados our lawyers specializing in commercial law will be able to clarify any doubts you may have in your specific case.