Company dissolution and liquidation in Spain: guide to closing a spanish company
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Company dissolution and liquidation in Spain: guide to closing a spanish company

How to dissolve and liquidate a limited liability company in Spain

In the dynamic landscape of business, not every venture leads to success. Recognizing when to step back is as crucial as knowing when to advance. This article will unpack the structured process of closing a limited liability company in Spain, guiding you through the legal intricacies of company dissolution and liquidation in a jurisdiction, the spanish one, that is as complex as it is rewarding. We will cover the most common questions regarding company dissolution and liquidation in Spain: what happens when a corporation is dissolved? Can it still operate? Can you reverse a company dissolution? Let’s find out.

lawyer sign the dissolution of a company in spain

How to close a limited company in Spain?

Closing a business in Spain requires a clear understanding of the procedures and legal implications involved. Business owners may find themselves in a position where closing their limited company is the most viable option due to various strategic or economic reasons.

It is essential to differentiate between voluntary liquidation, initiated by the company’s shareholders when the business is solvent, and compulsory liquidation, which is court-ordered when the company cannot meet its financial obligations.

The process encompasses dissolution, liquidation, and ultimately, extinction, each with distinct legal requirements and consequences. For business owners, comprehending each phase is vital to ensure a smooth and compliant closure of their spanish company.

Before embarking on this process, it is advisable to undertake preliminary actions, such as settling outstanding debts and notifying all interested parties, to pave the way for a straightforward dissolution.

At Lawants we can help you take take these essential steps with expertise and diligence. Our team of experienced lawyers is well-versed in Spanish corporate law and can guide you through every phase of your company’s closure, ensuring compliance and minimizing potential complications.

Contact us today to ensure your company’s dissolution is handled professionally and efficiently.

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What is the difference between dissolution and liquidation of a corporation?

Dissolution and liquidation of a company, in Spain as in other countries, are sequential phases in the closure of a corporation, yet they are not synonymous.

Dissolution is the initial step where a corporation ceases to exist as a legal entity, following a formal decision by its shareholders or a mandate by the court. This act effectively ends the company’s ability to carry on business, except for necessary actions to wind up affairs.

Liquidation follows dissolution and involves the actual winding up of corporate affairs. This includes settling debts, distributing remaining assets to shareholders, and fulfilling any remaining contractual obligations. While dissolution can be seen as the decision to cease operations, liquidation is the execution of that decision, leading to the final closure of the company. The intricacies of these processes will be further explored in the subsequent paragraphs.


Dissolution marks the commencement of the end for a corporation in Spain. It is a formal declaration that the company intends to cease its operations and is no longer in a position to continue its business activities. This crucial first step is typically enacted through a resolution passed by the company’s shareholders, or it may be mandated by a court order in certain circumstances. The resolution must be registered with the Mercantile Registry, making the intent to dissolve public and initiating the subsequent steps of liquidation. The dissolution does not immediately terminate the company’s existence but instead starts a process where the company settles its liabilities and distributes any remaining assets. It is a period characterized by the company wrapping up its affairs, under the guidance of appointed liquidators, to ensure that all legal and fiscal responsibilities are met before the company can be fully extinguished.


Following dissolution, a company in Spain enters the liquidation phase, a meticulous process where the company’s remaining affairs are settled. The appointed liquidators, who may be the directors themselves or external professionals, take charge of the company’s assets and liabilities. Their role is to liquidate the assets, meaning they convert assets into cash or other forms of payment to settle debts with creditors. The liquidators must also address any legal obligations, such as terminating employment contracts and ensuring that employees receive their due compensation. This process is conducted under strict legal supervision to ensure fairness and transparency. Once all debts are paid, any remaining assets are distributed among the shareholders according to their respective shares in the company. The liquidation process concludes with the preparation of the final liquidation balance sheet, which provides a snapshot of the company’s financial closure, and is filed with the Mercantile Registry, marking the definitive cessation of the company’s activities.


Extinction is the final act in the life cycle of a company in Spain, the definitive point at which the company is considered legally non-existent. This phase occurs after the liquidation process has been completed. All actions required for extinction involve the de-registration of the company from the Mercantile Registry. To achieve this, the liquidators must submit the final liquidation balance sheet, along with a notarized deed of extinction, to the registry. Additionally, they are responsible for canceling any remaining contracts or commitments and ensuring that all company documentation is properly archived for future reference, as required by Spanish law. The extinction effectively nullifies the company’s tax identification number and releases the liquidators and shareholders from their roles and responsibilities associated with the company. With the extinction, the company’s legal obligations are concluded, and it ceases to exist as an entity under the law.

Reasons for company dissolution in Spain

In Spain, a company may be dissolved and closed for a variety of reasons, spanning economic, legal, and strategic factors. Economic factors often involve insolvency or the inability to meet financial obligations, which can lead to a compulsory dissolution by court order (read more in our article on insolvency and bankruptcy in Spain).

Legal reasons for dissolution include the expiration of the period for which the company was formed, as stated in the company’s bylaws, or the achievement of the company’s objective, rendering its continued operation redundant.

Additionally, a company may be dissolved ‘de pleno derecho’ (by operation of law) for reasons such as failing to commence its operations within a year of incorporation, or not operating for an extended period.

Strategic decisions also play a significant role in dissolution. Shareholders may agree at a meeting to dissolve the company voluntarily for reasons such as a change in the business environment, a decision to consolidate business operations, or a shift in shareholder interests. Voluntary causes for dissolution are often preemptive measures taken to avoid future complications or financial losses.

Each of these pathways to dissolution of a company in Spain is governed by specific regulations and requires adherence to distinct procedures to ensure legal compliance.

judge hammer and in the background lawyer and ceo shake hands after closing a company in. spain

Consequences of company dissolution and liquidation in Spain

Many might ask what happens if their corporation is dissolved. The dissolution and liquidation of a company in Spain carry significant consequences, particularly for shareholders and directors.

Shareholders may see the value of their investments diminish as assets are liquidated to cover the company’s obligations. In cases where the assets are insufficient to cover all debts, shareholders may not receive any return on their investment.

Directors, on the other hand, must navigate the dissolution process diligently, as any misstep could result in personal liability, especially if they fail to act when the company is insolvent.

Outstanding debts remain the company’s responsibility until they are settled. If the liquidation proceeds do not cover all debts, creditors may pursue legal action against the company’s directors if wrongful or fraudulent behavior led to the company’s insolvency. Moreover, the legal and tax implications of dissolution are profound. The company must continue to comply with all tax obligations until the liquidation is complete. This includes the submission of final tax returns and payment of any outstanding tax liabilities. Failure to adhere to these obligations can result in penalties and further liabilities for the directors. The dissolution and liquidation process must be executed with precision and in accordance with Spanish corporate law to mitigate these consequences.

Read more in our article unpacking the Spanish Companies Act.

Taxation during the closing of a company

During the closing of a company in Spain, the entity remains subject to corporate taxes throughout the dissolution and liquidation proceedings. This means that the company must continue to file corporate tax returns and pay any taxes due up until the point of extinction. In addition to corporate income tax, other taxes may apply depending on the company’s activities during the liquidation process. These can include Value Added Tax (VAT) on the sale of assets, Capital Gains Tax on the disposal of properties or shares, and Withholding Taxes on any payments made to employees or directors. It is also imperative to address any deferred taxes that have been accrued over the company’s lifetime. The company’s tax liabilities must be fully satisfied before the completion of the liquidation process to avoid any future claims or penalties against the dissolved entity.

What are the alternatives to company dissolution in Spain?

Before proceeding with dissolution, companies in Spain may consider several alternatives that could offer a more favorable outcome. Restructuring options are available and can provide a company with the opportunity to realign its operations, reduce costs, and potentially return to profitability. This may involve downsizing, renegotiating debts, or changing business strategies.
Mergers and acquisitions in Spain represent another avenue, where a company may merge with or be acquired by another entity, thus preserving some or all of its business operations. This can provide the company with access to new resources, markets, and operational efficiencies.
Lastly, bankruptcy procedures in Spain, while often seen as a last resort, can offer a structured way for companies facing insurmountable financial difficulties to either reorganize or liquidate under judicial supervision. This process can protect the company from creditors while it restructures its debts and operations, potentially allowing it to emerge as a viable business entity. Each of these alternatives requires careful consideration and professional advice to determine the most suitable path for a company facing the prospect of dissolution.

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Bankruptcy proceedings in Spain

In Spain, a company must declare bankruptcy when it is unable to meet its financial obligations as they fall due. The bankruptcy proceedings are a legal process designed to either allow the company to recover from its financial difficulties or to orderly liquidate its assets to pay off creditors.
The process begins with the common phase, where the court declares the bankruptcy and appoints a bankruptcy administrator. The administrator’s role is to take control of the company’s assets, assess its financial situation, and represent the interests of the creditors.
Following is the agreement phase, where the company and its creditors negotiate a plan to restructure the debt. This may involve extending payment deadlines, forgiving a portion of the debt, or other measures to allow the company to continue operating.
If an agreement cannot be reached, the proceedings move to the liquidation phase. In this phase, the company’s assets are sold off to pay the creditors. The goal is to maximize the return for creditors through an orderly sale process.
The final phase is the qualification phase, where the court examines the reasons for the company’s insolvency. If any irregularities or negligent behavior are found, those responsible can be held personally liable. This phase is crucial to determine the legal consequences for the company’s directors and administrators. Each phase of bankruptcy proceedings in Spain is complex and requires careful navigation to ensure the best possible outcome for all parties involved.

Recent measures and regulations on company dissolution and liquidation in Spain

Recent legislative developments in Spain have introduced new measures and regulations impacting company dissolution and liquidation processes. Notably, the Royal Decree-Law 20/2022, approved on December 27, has implemented adjustments aimed at streamlining these procedures. These measures are designed to simplify the complexities involved in winding up a company, making it more efficient and less burdensome for businesses facing closure.
Additionally, the Spanish Insolvency Act plays a pivotal role in regulating the dissolution and liquidation of companies. It outlines the legal framework for insolvency proceedings, including the rights and obligations of all parties involved. The Act provides a structured approach to ensure that the process is conducted in an orderly and fair manner, protecting the interests of creditors, shareholders, and employees alike. These regulations are part of Spain’s ongoing efforts to modernize its corporate legislation and provide a supportive environment for both thriving businesses and those in the process of dissolution.


What are the initial steps to dissolve a company in Spain?

The initial steps include passing a resolution for dissolution by the shareholders or board of directors, appointing a liquidator, and registering the dissolution with the Mercantile Registry.

Can you reverse a company dissolution in Spain?

Reversing the dissolution is possible only under certain conditions and typically before the liquidation process has been completed.

Can a company still operate if dissolved?

No, once a company is dissolved, it cannot continue operating or enter into new transactions except for those necessary to complete the liquidation process.

Can a company be dissolved without going into liquidation?

No, dissolution is the first step that leads to liquidation, where the company’s assets are disposed of to settle debts.

Can you dissolve your own company?

Yes, in Spain, the shareholders or owners of a company can initiate the dissolution of their own company. This is typically done through a formal decision made in a general shareholders’ meeting, where a resolution to dissolve is passed.

How to dissolve a limited company if a shareholder does not want to?

Dissolving a limited liability company in Spain when a shareholder is opposed requires a majority vote in favor of dissolution at a general shareholders’ meeting. The necessary majority is typically defined in the company’s bylaws but generally requires more than half of the voting rights. If the bylaws stipulate a higher majority and this is not met, or if a minority shareholder believes the dissolution could cause unjustified harm, they may appeal to the court for protection of their rights. It is essential to follow the legal process meticulously to ensure the dissolution is valid and binding.

Does dissolution mean that the company does not exist anymore?

Dissolution does not immediately mean that the company ceases to exist. It is the initial step in the process where the company ceases its business activities and begins the liquidation process. The company continues to exist as a legal entity during the liquidation phase, where its assets are liquidated to pay off debts. Only after the liquidation is complete and all legal and fiscal obligations have been fulfilled, the company is extinguished and ceases to exist from a legal standpoint.

How long does the liquidation process typically take?

The duration of the liquidation process can vary, but it generally takes several months to a few years, depending on the complexity of the company’s affairs.

Are directors personally liable for the company’s debts during liquidation?

Directors are not typically personally liable for the company’s debts unless there is evidence of wrongful or fraudulent behavior.

What happens if the company’s assets do not cover all its debts?

If the assets are insufficient to cover the debts, the liquidation proceeds will be distributed on a pro-rata basis among the creditors, and the remaining debts may be written off, unless personal guarantees are in place.

What are the tax obligations during the dissolution and liquidation process?

The company must continue to fulfill all tax obligations, including corporate taxes, VAT, and capital gains tax, until the liquidation is finalized and the company is deregistered.

Can you dissolve a company with outstanding debts?

Yes, a company in Spain can be dissolved even if it has outstanding debts. The dissolution process includes the liquidation phase, during which the company’s assets are sold off to pay creditors. If the proceeds from the liquidation are insufficient to cover all debts, the creditors will receive payments proportionally to the size of their claims in accordance with the priority established by law. If debts remain after the liquidation, they may be written off, unless personal guarantees or other legal instruments extend the liability beyond the company’s dissolution.


In conclusion, the dissolution and liquidation of a company in Spain are intricate processes that require meticulous attention to legal details and compliance with regulatory obligations. Lawants’ team of experienced lawyers and economists is equipped to guide you through every step of this complex journey. Our expertise ensures that your business closure adheres to all legal requirements, minimizing potential liabilities and maximizing the return from the liquidation process. At Lawants, we are committed to providing personalized legal, fiscal, and accounting advice to meet the unique needs of our national and international clients. Trust us to be the partner you need for a seamless and efficient company dissolution and liquidation experience in Spain.

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