Dissolution and Liquidation of Commercial Companies

Dissolution, the first phase prior to the extinction of the commercial company.

It’s as important to start well as it is to end well. The same applies to commercial companies.


What is the liquidation of the company?

Liquidation is the process in which the company, after its declaration of dissolution, carries out a series of actions, such as collecting credits and paying off social debts, aimed at establishing the social assets that will be distributed among the partners. The dissolution of the company does not imply its immediate extinction.

From the moment the company is in liquidation, its task is to collect credits, settle the obligations contracted as they become due, and carry out pending operations.


What does the liquidation of the company entail in practical terms?

With liquidation, the assets are realized with the payment of social creditors. Externally, the company cannot engage in activities other than those aimed at liquidating the company. Internally:

  •     The administrators cease their positions, being replaced by “liquidators.”
  •     Former administrators must collaborate with the liquidators when requested to do so.
  •     The statutes may provide that the administrators are also the liquidators.
  •     The General Meeting of shareholders will continue to be held normally, with the liquidators reporting on the progress of the liquidation.

In practical terms, the company remains in force, so the general rules of the company continue to apply to it; in addition to the particular rules of this liquidation phase.

Furthermore, publicity must be given by publishing the dissolution agreement in the BORM, in one of the newspapers with the highest circulation in the city where the registered office is established, and registration in the commercial registry.


What is the extinction of the company?

It involves the disappearance of the legal personality of the commercial company and of all contractual relationships.

The liquidators are obliged to grant a public deed of extinction of the company, as provided for in the Companies Act (Article 396). With this, all registry entries will be cancelled, and naturally, there may be a demand for accountability from the liquidators by partners or creditors for any damage caused by fraud or negligence in their positions.




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