Spanish Company Liquidation & Insolvency Procedures Explained

If your business in Spain is no longer viable, it’s critical to follow the legal steps for company liquidation or insolvency. Failure to comply with Spanish regulations can expose directors and shareholders to personal liability.

This article explains the types of liquidation, how to handle company debts, and the legal obligations for dissolving or winding up a Spanish company.

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🧾 When to Liquidate a Spanish Company

You may need to dissolve or liquidate your company in Spain due to:

• Business inactivity

• Continuous losses or insolvency

• Completion of the corporate purpose

• Shareholder deadlock

• Expiration of the company term (if stated in bylaws)

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⚙️ Voluntary Liquidation of a Solvent Company

For solvent businesses that wish to close operations:

✅ Steps for Voluntary Liquidation:

1. Shareholder Resolution

   • Call a general meeting

   • Approve dissolution and appoint liquidators

2. Deregistration with Tax Authorities (AEAT)

   • File tax declarations and settle outstanding taxes

3. Settle Debts and Sell Assets

   • Pay creditors in order of priority

   • Liquidate company assets

4. Distribute Remaining Assets

   • After debts are paid, divide surplus among shareholders

5. Register Liquidation at the Mercantile Registry

   • Submit dissolution deed and final balance sheet

📌 This process is regulated by the Spanish Companies Act (Ley de Sociedades de Capital).

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💸 Insolvency Proceedings in Spain (Concurso de Acreedores)

If your company cannot pay its debts, you are legally required to initiate insolvency proceedings within 2 months of insolvency.

Types of Insolvency:

• Voluntary: Initiated by the company itself

• Necessary: Requested by creditors

Key Steps in Spanish Insolvency:

1. File for Insolvency at Court

2. Appointment of an Insolvency Administrator

3. Asset valuation and debt review

4. Attempted restructuring or liquidation

5. Final liquidation if no rescue plan succeeds

⚠️ Directors may be held personally liable if they delay filing for insolvency.

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🧑‍⚖️ Director Liability Risks

Directors have a fiduciary duty to initiate dissolution or insolvency if the company is in financial distress.

They can face personal liability if:

• Insolvency is not declared in time

• Taxes or social security are unpaid

• Transactions harm creditors after insolvency

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🏛️ What Happens to Debts and Employees?

• Employees: Must receive severance under Spanish labor law

• Social Security & Tax Debts: Must be paid or negotiated

• Bank Loans & Suppliers: Ranked by legal priority

The FOGASA fund may cover unpaid employee wages if the company is insolvent.

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📅 How Long Does Liquidation or Insolvency Take?

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🔚 Alternatives to Full Liquidation

Consider these alternatives before dissolving:

• Dormant status (no operations, no liability)

• Mergers or acquisitions

• Debt restructuring agreements

• Selling the company’s shares or assets

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👨‍💼 Borderless Lawyers: Business Closure Specialists

We support foreign business owners in Spain with:

• Legal dissolution and liquidation filings

• Insolvency advice and representation

• Negotiating debt settlements

• Protecting directors from liability

• Labor law compliance for layoffs