How to close a company in Spain: dissolving and liquidating an SL

Closing a sociedad limitada (SL, the Spanish private limited company) is not the same as stopping invoicing or switching off the office lights. It is a procedure with three stages (dissolution, liquidation, extinction) that runs through the shareholders' meeting, the notary and the Registro Mercantil (Commercial Registry), and it usually takes three to six months. Until it is finished, the company is still alive in the eyes of the tax office and the Registry, with everything that drags along. Here is how it works.

Leaving the company dormant is not closing it

The most common mistake is thinking a company with no activity closes itself. It doesn't. A dormant company (sociedad inactiva) still has to file corporate tax every year (Impuesto sobre Sociedades, the modelo 200 form), keep its books, and deposit annual accounts at the Registro Mercantil.

Skipping those duties is expensive. Failing to deposit accounts is fined between 1,200 and 60,000 euros, the Registry closes the company's page (so it can no longer register anything), and the tax office can even revoke the NIF (tax number). On top of that, an SL that has been dormant for more than a year is, by law, in a cause for dissolution (article 363 of the Ley de Sociedades de Capital, the Companies Act). Leaving it parked doesn't avoid the problem: it postpones it and makes it costlier.

The director's two-month clock

When a cause for dissolution appears (losses that push net assets below half the share capital, a halt in activity, an impossibility of pursuing the corporate purpose), the director has two months to call the general meeting and propose either dissolving the company or fixing the cause. That is article 367 of the Ley de Sociedades de Capital.

If the director lets that deadline pass and does nothing, they become jointly liable, with their own personal assets, for the debts the company takes on from that moment. And staying off the paperwork is no shelter: the administrador de hecho (de facto director), whoever actually runs the company without being appointed, is liable in the same way. This is why closing properly and on time protects the person running the business.

Stage 1: dissolution

Dissolution opens the process. The shareholders meet in general meeting and approve winding up the company by the majority the law requires. The resolution goes into the minutes, is raised to a public deed (escritura pública) before a notary, and is registered at the Registro Mercantil.

At the same meeting the liquidadores (liquidators) are appointed. They replace the directors and take charge of closing the company. Unless the bylaws say otherwise, the directors automatically become the liquidators. The dissolution is published in the Boletín Oficial del Registro Mercantil (BORME, the official gazette); the Registry does this itself, automatically and free. From here on the company adds the tag en liquidación (in liquidation) to its name.

Stage 2: liquidation

This is the substance stage, the one that really takes time. The liquidators draw up an inventory and a balance sheet as at the dissolution date, collect what is owed to the company, pay the creditors, and sell off whatever assets remain.

The order matters: creditors are paid first, and only what is left over is shared among the shareholders in proportion to their holding. That distribution is set out in the balance final de liquidación (final liquidation balance sheet), which the meeting must approve. If the assets aren't enough to cover the debts, the route is no longer an ordinary liquidation but insolvency proceedings (concurso de acreedores).

Stage 3: extinction

Once the final balance is approved, a two-month window opens in which a shareholder can challenge it. After that, the liquidators grant the deed of extinction (escritura de extinción) and register it at the Registro Mercantil, which cancels all of the company's entries. At that point the SL legally ceases to exist.

The tax close-out remains: deregistration with the tax office through the modelo 036 form, which requires proof that the Registry cancellation came first, and filing the last Impuesto sobre Sociedades of the financial year.

What it costs and how long it takes

A dissolution and liquidation without complications usually costs between 800 and 1,200 euros, counting the notary (around 300 to 600 euros), the Registry, publications and advisers. The usual timeframe is three to six months, and it stretches when there is property to sell, debts to negotiate, or shareholders who can't agree.

What happens to a partner living in Italy

When the leftover assets are shared out, each partner receives their cuota de liquidación (liquidation share). For the tax office, the difference between what they receive and what they once paid for the holding is a capital gain (or loss), taxed in the year the company is liquidated.

If the partner is not resident in Spain, that gain falls under Impuesto sobre la Renta de no Residentes (IRNR, non-resident income tax). Here the Spain-Italy double taxation treaty (signed in Rome in 1977) carries weight: as a general rule, gains on the transfer of shares that are not in real-estate companies are taxed only in the country where the person obtaining them lives, that is, in Italy. The exception is companies whose value rests mostly on property. So, before sharing anything out, it pays to be clear on where and how each partner is taxed.

If you have any doubts, Riondato & Partners is here to help

With over 45 years of experience between Italy and Spain, at Riondato & Partners we guide people who own a company in Spain and want to close it in an orderly way, without leaving loose ends with the tax office or the Registry. If you are thinking of winding up your SL, or you have had a dormant company for a while, get in touch with us.

Sources

• Infoautónomos: closing a company step by step
• Infoautónomos: obligations of dormant companies
• Companies Act (LSC), article 367 (director liability)
• Consolidated text of the Spanish Companies Act (BOE)
• Spanish Tax Agency: partner withdrawal and company dissolution
• Spain-Italy double taxation treaty (BOE)