Deregistering a company is a complex legal and fiscal process involving three key stages: Dissolution, Liquidation and Extinction. Below are the steps you need to follow to carry out this procedure in a structured and correct manner.
Dissolution of the Company
Dissolution marks the formal cessation of business activity, although the company remains active until liquidation is completed. To do so, Form 036 must be filed, indicating the cessation of activity.
- A temporary cessation of activity can be applied for if the company is not operating, which reduces tax costs for one year.
Causes for dissolution (according to Royal Legislative Decree 1/2010):
- Cessation of activity for more than one year.
- Fulfilment of the purpose for which it was created.
- Impossibility of achieving its social purpose.
- Paralysis of the corporate bodies.
- Losses that reduce the net assets to less than half of the share capital.
- Reduction of the share capital below the legal minimum.
- Specific causes established in the articles of association.
Procedure:
- Convening of the General Meeting:
- In a Limited Company (SL): requires the favourable vote of at least one third of the share capital.
- In a public limited company (SA): an ordinary majority (half plus one) is sufficient.
- Public deed and registration:
- The agreement must be notarised and registered in the Commercial Register.
- “In liquidation” is added to the company name.
- Possibility of reactivation:
- It can be reversed if the cause for dissolution disappears and the distribution of the liquidation share has not been started.
Liquidation of the Company
Liquidation consists of converting assets into cash to pay debts and distributing the remainder among the partners.
Convening of the General Meeting of Shareholders: Liquidators (who may be the administrators themselves) are appointed and cease to hold office.
Duties of the liquidators:
- Draw up an inventory and an initial balance sheet.
- Settling debts with creditors (including outstanding taxes such as VAT and personal income tax).
- Sell the company’s assets.
- Present the Final Liquidation Balance Sheet for approval at the General Meeting.
- Processing tax deregistrations (Form 036) and Social Security deregistrations.
Distribution among Partners: The remainder is distributed among the shareholders according to their share in the share capital.
Extinction of the Company
Extinction marks the legal disappearance of the company and its final entry in the Commercial Register.
- Public deed:
- To confirm the payment of debts or the consignment of outstanding receivables.
- Declare the liquidation shares distributed among the members.
- Registration in the Provincial Commercial Register:
- The registration entries are cancelled, concluding the existence of the company.
- Final tax obligations:
- Pay 1% of Corporate Transactions to the regional tax authorities.
- To declare capital gains or losses in the Personal Income Tax according to the amount of the settlement received.
Important Tax Aspects
- Corporate income tax: This is levied on the difference between the book value and the market value of the assets distributed.
- VAT: Can be levied on non-monetary supplies, subject to specific exceptions.
- IRPF:Partners declare capital gains or losses arising from the liquidation value received.
- Property transfer tax: Taxed at 1% of the total value of the assets distributed as a corporate transaction.
Ways to dissolve a company
There are three main ways to dissolve a company:
- Transfer of ownership: Purchase or sale of the company.
- Liquidation: cessation of activity, payment of creditors, distribution among partners and definitive closure of the company.
- Insolvency proceedings: This is requested when debts cannot be covered and at the end of the legal proceedings, the court approves the liquidation and dissolution of the company.
The process of how to deregister a company can be complex and costly depending on its financial and legal situation. To ensure that everything is done correctly and to minimise potential risks, having the support of a specialised professional is key.
Contact with us. As experts in commercial and tax law, we offer you the advice you need to manage this process efficiently and safely. Proper planning will not only allow you to comply with all legal requirements, but also to optimise your results. We are here to help you.
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